The PGC suggestion list is case-insensitive for your friends, and case sensitive for all others.
The problem with making it case-insensitive is much bigger than you might think - geocaching is a multi-language game now. Should "C" match for all of these: cçćĉċčƈȼɔΓγ ? Does French consider c and ç to be the same letter? Some non-Latin alphabets also has upper and lower case forms, I think Arabic is one of these. What about numbers? Should "5" match for "V" and "five"? Or the sino-Japanese equivilent?
I guess it is just a big lookup table, but I am not sure that such a table already exists.
Geocaching.com is also case sensitive - "Dave" is a different name from "dave"