"Indian" comes from Italian/Spanish "gente in dios" (God-like people)? False etymology?

A while ago in January The Black Hebrew Israelites were speaking/shouting/proselytizing to surrounding people at Lincoln Memorial. The speaker claimed that the word "Indian" means "savage". A member from the crowd approached the speakers, claiming he was a historian, and that "Indian" is a Spanish word meaning "God-like people". Interestingly the speaker from the Black Hebrew Israelites agreed with him.

This video has been pulled by Youtube. Here is another link to the argument.

I had never heard this etymology before. I searched a number of dictionaries but they didn't give an etymology. At Merriam-Webster many of the user who looked up the word said they were prompted to do so because of this section of the video.

So I went to Online Etymology Dictionary, and found no trace of the word God.

In my admittedly meager research I did find a question on this very site, Why do Americans still call Native Americans “Indians”?. Interestingly I found some trace of this etymology from a quotation of comedian George Carlin in the second answer. I quote from the quotation from the answer of that user:

Now, the Indians. I call them Indians because that's what they are. They're Indians. There's nothing wrong with the word Indian. First of all, it's important to know that the word Indian does not derive from Columbus mistakenly believing he had reached "India". India was not even called by that name in 1492; it was known as Hindustan. More likely, the word Indian comes from Columbus's description of the people he found here. He was an Italian, and did not speak or write very good Spanish, so in his written accounts he called the Indians "Una gente in Dios". A people in God. In God. In Dios. Indians. It's a perfectly noble and respectable word.

Now, in fairness, I noticed that Carlin says "more likely the word Indian comes from", so it seems he qualified that statement with an expression of uncertainty.

Anyway, that's what I found. In a comment to that answer a user comments:

Deriving "Indian" from "In Dios" really really really sounds like a backronym (or backmanteau, or whatever). George Carlin was a comedian, not an etymologist or historian. Link

I have good reason to doubt this etymology, but it's surprising that it seems to be a popular etymology doing the rounds, such that two speakers in that video believed it, one of whom claimed he was a historian, and George Carlin also spread this.

My first question is: This is a false etymology, right? If so, any idea where it originated?

Second question (just for general knowledge): The word India was used for the geographical area of India going back a long way correct? It's not the case that it was only referred to as Hindustan. My reading on Wikipedia suggests that "India" was used by Herotodus in 4th century BC and from the 9th century in Old English.

A Hathi Trust search of the bilingual (Spanish/English) edition of the Cecil Jane translation of The Four Voyages of Columbus: A Documentary History reports 90 instances of the word gente and 50 instances of the word Dios, but 0 instances of the phrase gente in Dios.

The earliest match for the "gente in Dios" etymology that a Google Books search turns up is from both The Ontario Indian, volume 4 (1981) and Parabola (1981):

Christopher Columbus going ashore in the Antilles, was struck by the profound well-being of the island Arawak. He called them indios, not because he imagined them to be inhabitants of (which in the fifteenth century was still called Hindustan) but because he recognized that these friendly, generous Taino people, soon to be extinct, lived in blessed harmony with their surroundings—"una gente in Dios, "a People in God."*

*(Courtesy of Russell Means)

These sources suggest that Russell Means, a Native American activist, was the earliest recorded source of the proposed etymology. Means may have been making this argument for some time (he was born in 1939), but I don't find any reference to his suggested etymology from before 1981.

Etymology Online reports that the word Indian in relation to subcontinental India entered English around 1300 and appeared in English texts in connection with North American native peoples no later than 1553:

Indian (adj., n.)

"inhabit of India or South Asia; pertaining to India," c. 1300 (noun and adjective), from Late Latin indianus, from India (see India). Applied to the aboriginal native inhabitants of the Americas from at least 1553 as a noun (1610s as an adjective), reflecting Spanish and Portuguese use, on the mistaken notion that America was the eastern end of Asia (it was also used occasionally 18c.-19c. of inhabitants of the Philippines and indigenous peoples of Australia and New Zealand). The Old English adjective was Indisc, and Indish (adj.) was common in 16c.

When a term is claimed to have a specific origin, it seems reasonable to ask for two kinds of corroboration: (1) evidence that the person who is said to have coined the expression actually said the word or (in this case) phrase that is attributed to him or her; and (2) evidence that the claimed origin was proposed or has for a reasonably long time been taken seriously by scholarly etymologists.

In the present case, we have no evidence that Columbus ever recorded the phrase "gente in Dios"; the paper trail for the claimed etymology (at this point) goes no farther back than 1981; its most likely popularizer had no academic background in linguistics; and (as far as I know) no professional etymologist has argued in favor of the claimed origin. Therefore, I think, the claim that "gente in Dios" is the source of Indian in connection with Native Americans is very probably an instance of false (or perhaps folk) etymology.

I think I found something interesting about this story. This is found in the Wikipedia article titled Native American name controversy.

First of all the article says about Columbus:

When he landed in the Antilles, Columbus referred to the resident peoples he encountered there as "Indians" reflecting his purported belief that he had reached the Indian Ocean.

Now here's an interesting part further down:

Alternative etymology

In the late 20th century, some American public figures suggested that the origin of the term was not from a confusion with India, but from the Spanish expression En Dios, meaning "in God", or a similar one in Italian. Proponents of this idea include the American Indian activist Russell Means; the author Peter Matthiessen, author of In the Spirit of Crazy Horse, a view of American Indian history through the life and trial of Lakota activist Leonard Peltier; and the comedian George Carlin.

In his book The Wind Is My Mother, the Muscogee writer Bear Heart (Nokus Feke Ematha Tustanaki) wrote: "When Columbus found the natives here, they were gentle people who accepted him, so Columbus wrote in his journal, 'These are people of God' ("una gente in Dios"). Later the 's' was dropped and Indio became Indian." However, as the writer David Wilton noted in his book Word Myths: Debunking Linguistic Urban Legends, this phrase does not appear in any of Columbus' writing. Wilton also says that since Greek and Roman times, more than a millennium before the voyages of Columbus, many European languages used variations of the term "Indian" to describe the peoples of the Indian subcontinent. Alternative etymology

So these proponents espousing this curious etymology include the three people listed above. One of them was a Native American activist. This is interesting, but the evidence does point to this being an urban legend.

According to a post from three years ago on a Reddit thread, this etymology goes back to Peter Matthiessen's 1984 book Indian Country.