Killary Harbour, in Irish an Caoláire Rua, is a long, narrow sea-inlet in Connacht, between County Galway/Contae na Gaillimhe and County Mayo/Contae Mhaigh Eo. A place definitely worth a visit, but what does caoláire mean?
It is actually a compound of caol, “narrow”, “slender”, and sáile, “saltwater”, “sea”, thus caol-sháile, “narrow-sea”. Sh- is only pronounced [h], and as a rather fleeting sound it has gone missing when the original etymology has been forgotten.
As regards the l > r change (caolsháile > caoláire), there is a linguistic phenomenon called dissimilation (díshamhlú in Irish, I’d say), which is quite universal and frequently applies to words with two similar liquid consonants (two r’s, or two l’s). It means that one of the similar consonants changes into something else, typically just into the other liquid consonant, as here. (There are similar examples from many languages of the world – for example, from Georgian, where the nationality suffix is –uri, but a Russian is rusuli; or from Finnish, where a bourgeois person is called porvari, but in dialects often becomes porvali.)