People can have Islamic names and still be British citizens, they can still be born in this country and have resident families. You can't judge a person's nationality by their names, any more than you can tell their religion just by looking at them.
If you read the first paragraph of the Wiki article you will find it goes on to say that, following the Act of Union in 1707, the Peerages of England and Scotland were replaced by one Peerage of Great Britain. This was later succeeded by the peerage of the United Kingdom.
Mr Ahmed (as he was when elevated to the peerage in 1998) is British and so is eleigable to be enobled as a Peer of the United Kingdom.
The five-rank peerage of duke, marquis, earl, viscount and baron date from the Norman Conquest. The Anglo_Saxon peerage had just Eorls, which explains the retention of that title in the peerage as the only English one instead of the French count.
As I understand it, a peer is someone who has enough 'friends' in 'high places' that they've managed to wrangle a meaningless title out of the system; so they have the option of lording it over the rest of us less valuable dregs of society. I'm unsure anything other than the ability to make the right contacts and know what they need to do to be part of the clique is needed. The name is not going to have a great influence.
Interestingly the rank of baronet, an hereditary knighthood but not part of the peerage, was created by James I with one purpose only; to raise money. The sale of honours is by no means a new phenomenon.