The name of the languge and people of Wales has the following derivations and relations taken mainly from the Online Dictionary.

Welsh

O.E. Wilisc, Wylisc (W.Saxon), Welisc, Wælisc (Anglian and Kentish). From Wealh, Walh "Celt, Briton, Welshman, non-Germanic foreigner;"

In Tolkien's definition, "common Gmc. name for a man of what we should call Celtic speech,"

Also applied to speakers of Latin, hence O.H.G. Walh, Walah "Celt, Roman, Gaulish," and O.N. Valir "Gauls, Frenchmen" (Dan. vælsk "Italian, French, southern")

P.Gmc. *Walkhiskaz, from a Celtic name represented by L. Volcæ (Caesar)

"Ancient Celtic tribe in southern Gaul." The word survives in Wales, Cornwall, Walloon, walnut, and in surnames Walsh and Wallace.

Borrowed in O.C.S. as vlachu, and applied to Romanians

Hence Walachia.

Among the English, Welsh was used disparagingly of inferior or substitute things

Hence Welsh rabbit (1725), also perverted by folk-etymology as Welsh rarebit (1785).