I think the middle name is a good place to use some first name from inside the family. My middle name is my father's first name, my brother's middle name is the name of one of my mom's brothers. I'd likely do something along those lines. Really, the middle name is something only brought up at parties or in cases where it's really needed to distinguish an identity from a like-named person.
I tend to agree, and that's kind of what my family does, at least with the male members anyway. My middle name is my paternal grandfather's first name (and my first name is my maternal grandfather's first name). My older brother's middle name is my dad's first name, and his son's middle name is his own first name.