I always treat all comments as a compliment and thank them for noticing. As mentioned before, this deflates an intended insult and makes the insulter look foolish. Unless the person is actually complimenting me and is just ignorant of the proper name, then I will educate them.

On this same subject, I have to share an experience this last weekend:
I was at my nephew's birthday party (5 years old) and I walked in wearing a Royal Stewart kilt. This little girl who couldn't have been more than 4 looked at me with wonder in her eyes and said "Wow, what a boodiful dress!!". I think that is one of the best compliments I have ever received.
I explained to her that it was a special kind of dress that some men wear and it's called a kilt and thanked her for the compliment.