KERNAL is the original name as I spec'd it.  I'll let someone else edit how Bob Metcalf (ethernet PARC and 3Com founder) was a consultant at the Moorpark R&D; facility for Commodore in the summer of 1980.

The "N" was for networking. I provided hooks in the PET ROM so that the "Teacher's PET" be attached to a master-slave network. In the Commodore 64 there was a cartridge with the networking software and an interface card to the 6522 serial port.  We had two test installations in New Brighton Middle School in Capitola, Ca. and the Watsonville Middle School in Watsonville, Ca. Both had a PET with 30 C-64's. I developed all the hardware and did the fabrication myself.  Later a school in Wayne, PA was set up with a similar installation.

Another misconception is the origin of the Vic-20.  The real creator of the concept was Jim Kennedy who was the Commodore engineering manager after Chuck Peddle left in August, 1978 to work at Apple. Jack Tramiel asked him to visit MOS and he talked to Bob Yannes where he got the specs for the VIC chip.  He and I discussed a prototype VIC-20  but unfortunately Kennedy was canned in February 1980 when CHuck was re-hired by Commodore. 

John Feagans
Ele'ele, Hi.