OK, I got a bit mixed up with
Andy's Sand-Iego (nice try, by the way) but I think I can help a bit, here.
Diego does come from
Iago which is an old Spanish form of
Jacob and/or
James. Now, there was a Saint called "
Santo Iago" (or
San Iago, which is the same thing) in old Spanish, which later became
Santiago (notice how they got rid of that "O").
Santiago does mean Saint
James and/or Saint
Jacob and/or
San Diego. There are many cities in Latin
America that are named after
Santiago de Compostela, which is a famous patron saint from
Santiago de Compostela, in Galicia, Spain... (Redundant, huh?. Bare with me!) such as
Santiago de
Chile, or
Santiago de Los Caballeros, Guatemala and in this case
San Diego, California.
Hope that helped a bit,
Magia.