I agree that the current wording in the doc-strings is ambiguous. It should be more careful to distinguish between

mu : true/population mean
xbar : estimated/sample mean

I disagree that the keyword arguments should be made the same. There is an important conceptual difference between these two things that the user needs to be aware of and mu, xbar - as symbols rather than ascii characters - are widely used for this. See e.g. this Wikipedia entry (although it uses ybar instead of xbar):
http://en.wikipedia.org/wiki/Variance#Population_variance