In German, we would say it is "historisch gewachsen" (it grew through history). I'm German and not used to writing serious stuff in english, so please bear with me here. My primary source is in German, so I'll link to the english Wikipedia whenever I refer to people or events from that time you may not know about.
The Pour le Mérite actually still exists, though in a different form: the Bundespräsident can still use the civil variant to honor people for contributions to science and/or art. Its history can be found on the Website of the modern civilian version and in this book linked on said website, but both are in German and thus probably of little use to you. The latter link even contains a copy of the original proclamation by Prussian King Friedrich Wilhelm IV from 1842, where he added the civilian version to the older military honor. But where did the military version originate?
Well, the website of the Bundespräsident doesn't go into much detail regarding the military side, because military honors from the World Wars are not something current Germany likes to parade around. But the book linked on the website of the order itself was written by Horst Fuhrmann, a German historian specialized into medieval times, and you'll find his book to be the main modern source on these medals.
Fuhrmann commits a lot of work to explain why those military medals exist in the first place, starting with Aristotle and working his way onward. That's all terribly interesting and of absolutely no use to us, but after 30 pages he finally arrives at the end of the 17th century and explains:
Preußen kannte den »Ordre de la generosite«, das sogenannte Gnadenkreuz, weil man - damaligem Sprachgebrauch nach - mit ihm »begnadet« wurde.
Rough, literal translation:
Prussia had a medal called "ordre de la generosite", better known as "medal of grace", because you were - as people would say back then - "graced" by it
Why was this named in French? He doesn't say, but an educated guesser would assume it's because of French being a bit of a lingua franca in 17th century europe, as has been explored elsewhere before by u/PsychologicalInjury2.
Anyway, Fuhrmann continues by explaining how Friedrich II established the Pour le Mérite as a kind of follow-up to the de la generosite, and indeed there were rules about officers having to give up the latter when recieving the former. In a footnote under the pictures on pages 32/33, Fuhrmann points out how the Pour le Mérite was designed and conceptualized within a span of only nine days - Friedrich II needed a military honor for use during his war in Silesia and, finding the older de la generosite to have no rules and statutes associated with it, he just made his own medal ("...innerhalb der wenigen Tage zwischen dem 7. und dem 16. Juni 1740 der Orden und sein Zeichen beschlossen, entworfen und hergestellt"). Why did he name this one in French, too? Well, because at the time, France and Prussia were actually fighting on the same side, so why wouldn't he?
The Pour le Mérite stayed in use for the rest of the Prussian Monarchy, which transformed into the German Empire and ended with the end of the Great War, as you know already and has been looked at in great detail elsewhere. This is a long and complicated period of history, and I'm not equipped to go into great detail here, but Fuhrmann is and he, again, does so on ~30 pages, but none of it makes mention of the linguistics of having a Prussian medal use a french name. You might, of course, ask the follow-up question:
"But if the Pour le Mérite was named in a period of French being lingua franca and Franco-Prussian enmity not being a big thing, why wasn't it renamed when either or both of those circumstances changed?"
And the answer would be: "No one knows exactly, but it wasn't". I hope this helped.
Edit: added ping to the user who explored French as lingua franca