Daniel Cassidy, author of the ridiculous How The Irish Invented Slang, claimed that dude comes from the Irish dúd or dúid, which means a long, neck, a penis or a fool. On the face of it, there is nothing strange or unbelievable about this claim. If there were no other candidates, this would be a perfectly reasonable claim, unlike the vast majority of Cassidy’s theories. However, as it happens, the Irish words beginning with dúd or dúid are only one candidate among many and certainly not the front runners.
Dude first makes its appearance in English in the 19th century in America. It was used to refer to a dandy or a city-slicker who stood out in a rural setting. There are various theories about its origin. One idea is that it comes from the song Yankee Doodle, which talks of ‘Yankee Doodle dandy’ who ‘stuck a feather in his cap and called it macaroni’. Then there is the German term Dudenkopf, which means a dandy.
Then there is a whole complex of Irish words related to dúid, such as dúidín (a long-necked pipe); dúdaireacht (craning your neck to eavesdrop or spy); dúdaire (a long-necked person, a dolt); dúdálaí (a shy person, a fool). Several of these refer to stupidity. None of them specifically refers to being a dandy, which was the original meaning of dude, unlike the other two candidates, either of which has a stronger claim to be the origin of dude.
Yet again, this shows how foolish it is to look for phonetic similarities and think that these are valid in themselves as etymological evidence.