I think I was in about fourth grade when people started saying that the word “dude” actually meant “a pimple on a donkey’s butt.” So calling someone a “dude,” (a real honorific in 1990) was actually an insult.
Now, the word “dude” itself has a long origin, emerging as a word for a well-dressed man some time in the 19th century and evolving to its current usage. I doubt there is, in fact, any particular term at all for a pimple on a donkey’s butt.
Googling around I see that this is not a local “Iowa in 1990” sort of thing, it’s fairly well-known and well-traveled, but with no hint of the origin. There are a few sites that indicate that it’s “Jerk,” not “Dude,” that means “a pimple on a donkey’s butt,” but this doesn’t strike me as sensible. Calling someone a pimple on a donkey’s butt isn’t THAT much different than calling them a jerk, though I imagine there are subtle differences, in the way that an “ass” and an “asshole” are not the same sort of person, exactly, or how a “jack-off” and a “wanker” are both terms derived from the same basic act, but describe two different types of people.
Where did you hear it?