Notes:

From the source:

From a more informed article:

First of these is that both the shape of the word and the combination of letters in it are redolent of words from al-jahaliyya, the pre-Islamic dark ages or ‘age of ignorance’ that – as well as being a time rich in poetry and narrative heritage – has huge connotations of hideous barbarity in the popular imagination, being the realm of jinns and monsters and evil spirits and marauding freaks.

The second, and equally important, point that al-Haj Salih stresses to me is another take on why a neologism is insulting: it’s an obviously fictitious name, for an obviously fictional concept. Once again, the movement’s claim to legitimacy as a state and to rule is being rejected as nonsense, reflected in a fabricated nonsense name for them.

Thank you, @CardinalJ, for the new link: http://www.freewordcentre.com/blog/2015/02/daesh-isis-media-alice-guthrie

Most important to me, however, is that whatever the true reasons, Daesh f------ HATES the term, and even if it doesn't directly help, changing how even a small portion of the population views this monster can mean something. Language is a powerful tool.