Wrong volume name for sshfs volume in Finder even with volname option

The options go at the end of the command, so in your case:

sshfs user@host:/somewhere/on/the/Y /Z -o volname=Z

I just had a similar problem and this fixes it for me!

You need a space between the -o and the volname:

sshfs -o volname=Z user@host:/somewhere/on/the/Y /Z
        ^

Struggling with this issue myself, I discovered that I needed to add the -o local option:

sshfs user@host:/somewhere/on/the/Y /Z -o volname=Z -o local

Beware that the OSXFUSE maintainers advise against this option, though, as it might invoke unwanted side-effects:

This option marks the volume being mounted as "local". By default, osxfuse volumes are marked as "nonlocal", which technically isn't necessarily the same as a "server" or "network" volume, but is treated as such by the Finder in some cases. For example, the Finder may not show "connected servers" on the Desktop or in the sidebar in some cases. If you use this option, you can get around this "limitation". However, wait! Don't be too tempted and think local is a magic pill that will solve all your problems. In fact, it may mess things up more than you realize. The operating system can be more aggressive in dealing with "local" volumes (a .Trashes. directory will be created, for one). You could run into mysterious problems with Disk Arbitration and other system components. I don't know (and possibly can't know--Mac OS X isn't all open source!) the side effects of using this option. Therefore, treat this as experimental and use with caution. Moreover, please do not file bug reports that involve this option--reproduce your issue without this option and then file a bug report.