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I'm with you on this one: it is very lovely with a longer history than most names and yet it was used in English as far back as, I think, the 16th century and has never been either too popular or ignored. Given enough daughters, which one never is, I'd certainly use it. I suggested it when our second daughter was born, as she looked very like her father's cousin Penelope (known as Penny), with long red hair; but I was outvoted. The possibility of Nell as an alternative nn is also attractive.

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My only reservation is strictly personal: I knew a girl at uni whose name was Yvonne but, because she squeaked a lot as a baby, she became known as Penny Squeaker (it's OK, I don't fully understand it either!) and was always and only known as Penny from then on. Her other nn at uni was Lopes, as in Penny lopes ...

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I'm amazed that people still stress about the rather ordinary syllable 'pee'! Surely that wouldn't be an issue after the age of about 8, if it ever was? Not one single Penelope that I've known, and I've known plenty, ever encountered it as a problem; but they were all known as Penny and not by the full form. Perhaps that matters?