[Nyororin]

I do not think that the word is well known slang, and I have never heard it used to refer to a penis... HOWEVER, there is virtually no doubt whatsoever that someone (countless people with a schoolyard sense of humor, no doubt) would find it either hilarious or offensive because it COULD be interpreted that way. "Pocket" something or other is very common in slang for penis, as is "monster". I have heard "Monster in my pocket" used to carry that meaning. Putting the two together is about as close as you can get to slang without actually being slang.

But I highly doubt this had a huge bearing on why it was not called Pocket Monster outside Japan. It is a lot more likely that it was merely a marketing and localisation decision. While "Pocket Monster" sounds "cool" in Japanese, it sounds a bit stiff in English. Especially when there is no strong culture of shortening names as there is in Japanese.

Pocket Monster is the original official name in Japan. This was shortened by children as it gained popularity, just as countless other words are shortened. MMM gave some good examples.

Pokemon is now close to officially called Pokemon instead of Pocket Monster - the company producing it is no longer directly Nintendo, but a split off individual company called "Pokemon". The Pocket Monster name hangs around mostly as a token of the past. This is to do with familiarity, and has little or nothing to do with the name given outside Japan.