I was literally just reading about this an hour ago! According to Simon Sebag Montefiore in Jerusalem: The Biography the name Judea had associations more with Jerusalem than the Holy Land itself. In 1947 the Jews were fighting bitterly against the Arabs for Jerusalem and it was unclear if they could/would hold the city. David Ben Gurion suggested 'Israel' and it was agreed upon.

Another question, Why didn't the go with Zion if the movement was called Zionism.