I think it's fine to use, if it's THE name for your baby. Really, she should be excited that a name she loves is being used on a family member. I don't think it's a big deal at all, but just be ready to explain that it's one you and your husband loved before they'd mentioned it if asked about the choice.
Thanks belle_petite for the siggy!
I don't see why it's a "problem" to use the name that you love for your baby!