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Lillian was definitely a nn for Elizabeth at first: in 1279 Lilion was recorded in England. In 1296 Lylie was recorded as a diminutive of Elizabeth. (See http://snipurl.com/a2vp for both, they're the last two names.)

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So I don't see why Lily can't be a nn for Elizabeth, though personally I think Lily stands fine enough on its own, since its common use didn't evolve from it being a nn name.

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Miranda