:
Naming is a design process just like designing is. You have to get the right feel with each word, and since that is something I always try to do, I can tel you how difficult and frustrating that is, especially without a crack team of Inhabitants. They also like to combine words that give a familiar feeling, but with a kick, a sort of "eew" factor. Scrab comes from crab and scab, for instance.
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Yes, most of the words are usually combines with words we already have created, and some of them are just slightly altered to make the name
sound Oddworld-ish.
When it comes to the others that don't fall into those two categories, all I can think of is that they make 'em up. I do the same thing when I have to give a character an odd name. It isn't all that hard, actually

.