DH's aunt died when his brother's wife was expecting; they used her name as a middle name. It is a beautiful name though!

I'd not use a dead person's name as a first name because to me it's as if you're trying to fill that place. As a middle name it's a nice thing to do if you like the name and the sentiment. And your child won't hate you for it when they grow up. But Carlo/Carla is a nice middle name, IMO.