I'm aware of traditional translations as "refined", "well-done", "perfected", "accomplished" etc. The point is that these adjectives make sense only in comparison to something else and so to fully grasp their meaning one needs to know what is that something is and how exactly Sanskrit is better.
I'm not interested in modern linguistics where this might be answered in the context of PIE, maybe only out of curiosity.
Personally, I have two ideas. One is that the name "Sanskrit" might have been given by ordinary people when they realized how much language of the sages was better than the language they used in their everyday lives, basically the same arguments that are given in comparison with English.
Another, more esoteric idea is that Sanskrit is perfect in the sense it describes gross sense objects and can be used to even produce them (on the evidence of mantra powers of the sages). This ability does not/might not exist in the language of "gods" when they talk to each other because they do not deal with sensory objects in their lives but communicate what we might call thoughts and emotions directly. This might be controversial because it assumes that our Bhu level of existence is more developed than Bhuvar and Svar planes of "gods" but, in a way, it is - we have something they don't and Bhu-Mandala IS the biggest, most developed and accomplished part of the universe.