Learn English – Word for taking too much pride in something mediocre

I don't know of any better single verbs than overdecorate, overornament or overembellish. Bedizen is good if you don't mind obscure. I might be tempted to coin baroquify. Related, possibly useful phrases include to tart [something] up and gilding the lily.

Reappropriation is the word you are looking for.

... the cultural process by which a group reclaims— re-appropriates —terms or artifacts that were previously used in a way disparaging of that group. For example, since the early 1970s, much terminology referring to homosexuality—such as gay and (to a lesser extent) queer and poof—has been reappropriated. [...] A reclaimed or reappropriated word is a word that was at one time a pejorative but has been brought back into acceptable usage—usually starting within the communities that experienced oppression under that word, but sometimes also among the general populace as well. [...] This can have wider implications in the fields of discourse, and has been described in terms of personal or socio political empowerment. [...]

Politics

However, the phenomenon is much older, especially in politics and religion. Cavalier is example of a derogatory nickname reappropriated as self-identification, while Roundhead, a Royalists derisory term for the supporters of the Parliamentary cause, is not (it was a punishable offence in the New Model Army to call a fellow soldier a roundhead). Tory (orig. from Middle Irish word for 'pursued man' Tóraidhe ), Whig (from 'whiggamore' (See the Whiggamore Raid)) and 'Suffragette' are other British examples. Yankee was originally used as an insult to America, but was reclaimed in the song "Yankee Doodle".