OP, I have to just join in with the chorus of other Brits asking just what the bleedin' hell you're talking about.
As for what I think appears to be your argument, just because our mystical or fantasy stuff doesn't happen to be laced with appostrophes, does not make it cute. For example, does the Balrog of Morgoth sound cute in the slightest? How about Grendel? (inb4 yes I know that's orginally viking, but most of our real old folklore came from what the vikings brought with them)
You appear to have fixated on one word (muggle) which is to be fair, quite a childish sounding word, but then hey, it first appeared in a kids book, and I somehow doubt that when she wrote it, J.K. Rowling had even considered the possibility that it would be so popular with adults, or that by the end of the series it wouldn't really be kids books any more. By the time such things had occured to her, it was too late, the word was already fixed in the canon.