Emily and Joshua of peer-see blog found the reason why Engrish is so prevalent in China: the poor Chinese kids never had a chance to begin with! Just look at these ABC picture blocks they used to teach English.
Link (The last one is precious!) - Thanks Leah McPherson!
As for the "dick"/"egg" connection... In some cultures, testicles are called "eggs." It's possible that the dictionary the blocks' creator consulted gave a variety of English synonyms (or near-synonyms)for "egg" without going into sufficient detail.
I manage a team of people from South Asia and in frustration yesterday one of the guys called me "Boss Uncle." It is very odd to hear them speak English almost perfectly with almost no accent, but use completely wrong words.
And yes, I said wrong. You never call your supervisor Boss Uncle.
Re: #3 (KiM) - "Panzer" is indeed a German word, meaning "panther." It was applied to either a type of tank or to tank units in general during WWII (an historian of the period would know better than I would of the specifics). I doubt that it became a general term for "tank," though. Yeah... kinda weird to see it used on blocks meant to teach English. However, a visit to a hobby-shop will turn up a number of plastic model kits manufactured in China and Japan, and of the military kits, German Panzer units are quite popular. (I guess German tank designs were visually more pleasing than others; thus the model kits are more popular than others.) It may be easy for one to make the assumption that "panzer" might be English for "tank," based on this, if identically-labeled kits are sold in China.