I think the name conflict problem is a fairly minor issue in the overall scheme of things.

The fact is that the C & C++ library market has not suffered at all from this problem; each vendor chooses their ugly prefixes and life goes on.

So I don't think this aspect of  Dylan's module system (or C++ namespaces) will have very much  impact on Dylan's (or C++'s) success or lack thereof.

Is that the ultimate criterion for having them in the language?

Modules put namespaces (and name choices in general) in the consumers' hands rather than the providers'.

In Dylan the consumer can choose which modules to use (even if they have the same module name) and which variables to use (even if they have the same variable name). The consumer can rename any variable to resolve a conflict or even just to be more meaningful in that consumer's context.

Why have to deal with ugly prefixes, that ultimately don't resolve all possible conflicts, when there is a module system that is