I'd say you should think how much you plan to use this tribe in your text. If you only use the myth and barely write about the people and their customs - or if you do use the tribe more but want to make up stuff concerning them - then the fake name could be your choice. On the other hand if you would treat them just like "the real thing" then I'd probably use the correct name.
It really doesn't matter. It's always fun to see agents sent to "Distant Eastern European Republic of Druplakistan"
You can use real locations freely - as far as I know. Countrys, towns, town districts, lakes, you can use them as you wish. If you plan to go more into detail (like adding McDonald's or Nike shoes) then you must be more careful as they are someones property. But locations should be ok.
