I would say it’s more like MERlind.
I got a kick out of the OP, being originally from Milwaukee and last lived in New BERlin, Wisconsin before moving to Maryland.
Massachusetts. Oh, Massachusetts:
[ul]
[li]Peabody is kind of like “PEE-b’dy”[/li][li]Needham and Dedham are “NEED-um” and “DEAD-um”, but Waltham is “Wal-tham” (or Wal-thum). Go figure. [/li][li]Quincy is pronounced “Quinzy”. Like the old description of tonsillitis. [/li][li]Billerica is “Bill-ricka” or “B’rika”. [/li][/ul]
For names like “Worcester” and “Leominster”, I go with the British pronunciation and have done okay. “W’stur” and “Lemin’str” haven’t occasioned any hilarity from the locals.
I don’t see a contradiction. The ‘dh’ combination isn’t something we use in English, as we do the ‘th’ combination. So ‘Wal-thum’ makes more sense than ‘Walt-um’ because we have a sound for ‘th’ and not one for ‘dh’.
Standard tests for BBC newsreaders used to include trip-up place names in the UK like
Kirkcudbright (=kuh-coo-bree)
Milngavie (=M’ll-guy)
Kirkcaldy (=kuh-coddy)
Beaulieu (=bewley)
Belvoir (=beaver)
Todmorden (=TOD-muh-d’n)
And even people who live there disagree about Shrewsbury (Shroe-sbree or Shroosbree?)
But then there is Feltham, which is pronounced like a handy double entendre for limerick writers.
Although the British pronunciation of Leominster is “Lemster”.
I’ll call it quasi-British, then. Basically if in doubt, I pretend to be on Masterpiece Theatre and wing it. 
Hey, don’t worry, most Brits (including me for the first 30 years of my life) get it wrong.
In the Western Cape, South Africa, there is a town named Napier. You might imagine it to be pronounced “NAY-peer”, like Clan Napier, for it is indeed named after Sir George Napier. But most locals actually pronounce it as if it was an Afrikaans name, so it comes out something close to “na-PEE-r”.
I grew up near Balmer Merlin.
The PNW is full of Indian names that can be problematic (Clatskanie comes to mind immediately). Alaska has the same sort of problem. But the ones in Alaska that usually trip people up are those that appear simple:
Valdez: val-DEEZ (usually pronounced vahl-DEZ)
Knik: kuh-NIK (usually pronounced “nick”, for some reason)
Matanuska (mat-a-NOO-ska) even gives people who have lived there awhile some trouble
Foreigners always say “suh-VILL” for Seville, “cuh-DEEZ” for Cadiz (CAH-dees) and “toe-LEE-doe” for Toledo, but that’s to be expected. Also “kuh-BULL” instead of “cobble” for Kabul.
Here in Portland we have Couch Street (named after Civil War general Darius Couch), which is pronounced “kootch”.
I too am a native cheesehead. I’m still sobering up from a weekend in the early 90s in Oconomowoc.
That’s the one I came in to post.
It is like a hazing ritual for the new newscasters. Live on the air is the first time they try to read Oconomowoc on the air. Laughter generally ensues.
And, yes, we are k-Man in the Cayman Islands, not K-min.
And, that’s a Baltimore (Ballmer) pronunciation. Folks where I grew up (Silver Spring) pronounce it normally.
ICE lip (me) EYE slip (wiki)
There’s also Hauppauge – HAH pog, Matinecock – ma TINNA cock, and Quogue – kwahg
Islip is from a village in England, the other three are Native American tribes or references.
I came in here to post Oconomowoc but got ninjaed. So I’ll post a subtle favorite:
Little Chute. Emphasis on the first word, not the second.
I live in (well, near) one of the “Wau-” towns, and I always have to pronounce/spell it over the phone to customer service people.
Oh! The OP forgot Wauwatosa.
There’s also Omro, which does not rhyme with “home row” but rather shares its vowels with “combo.”
No, it’s Barry.
Some odd ones in Vermont include the following:
Calais (rhymes with ‘palace’)
Charlotte (char-LOT)
Guildhall (gill-hall)
In Idaho, they have Kammiah, which no one will get right (they have the pronunciation on Wikipedia).
In Door County WI is Ephriam, which most people not from around there will not get right.
And there is Yachats OR.
When I lived in Portland, we could always tell when a newscaster had come from California because they could not speak the name of the local power company, PGE.
Hah! Native American place names. I live in Wenatchee, Washington. I’ve heard a few amusing mispronunciations of that name. (Hell, even my browser’s spellchecker doesn’t like “Wenatchee”.) my favorite local, deliberate mispronunciation is, “Wetsnatchee” 
Many years ago, while I was walking, I was stopped by a gentleman in a very fancy car, asking for directions. Judging by his voice, he was a tourist from England. He pointed at the map in his hand and asked me how to get to CHEE-lan. I looked at where he was pointing on the map. He was trying to get to Chelan, WA. I didn’t point and laugh at his pronunciation. I simply said, “To get to sheh-LAN, take the next exit and keep going north.”
More fun local names:
Washtucna (my favorite)
Chehalis
Snohomish
Snoqualmie
I worked with a guy who was very obviously Hispanic. As he rode his bike to work one day, a Hispanic guy pulled next to him and asked how to find the street called ‘STAT-ah Co-YAY-hey’. It took my coworker – for whom Spanish was his first language – a minute to understand.
The guy was looking for ‘State College’.