You could use 'Meringue'. The spelling is slightly different from the villager's name and that's how the name of the dessert is spelt, at least where I live.
You could also create some cute names with cake. For example Cupcake, Mudcake, etc. I like 'Lemonade' as well.
I'd also like to suggest 'Cadbury'. It's the name of a confectionary company known for its chocolate, which is very popular in Australia. I don't know how well known it is in the rest of the world but I just think it would sound nice as town name. Some other confectionary companies I think would make good names are 'Haribo' and 'Milka' (both German) and of course any that you can think of yourself