I do agree that the term "federation" and the use of the verb "to federate" (with its even weirder bastard cousin "defederate", which is not even a real word) is very unfortunate. It would be great to have a shorter and more fitting term. Something normal people would connect with more easily.
I find it especially problematic because its a word that translates poorly, at least in Danish. The Danish word for "federation" can also be used to mean an organization or association, which leads to further confusion. And the verbs for "to federate" and "to defederate" are also just... awkward and really just translate to "connect" and "stop connection" or something. It's not great.
Not that I have any alternatives to suggest honestly. And let's be real, even if I did, that ship has sailed, unless we can rally a big rebranding effort for the fediverse. Such a thing does not sound easy.