yeah, it's one of those urban legend sort of stories that just won't go away, because it makes such a good story. actually®, it appeared quite a bit before 1918, as you will see from the OED citations. I think that the notion that it may have just evolved from earlier heteronyms has much merit.
Of obscure origin, but cf. posh n.2 The suggestion that this word is derived from the initials of ‘port outward, starboard home’, referring to the more expensive side for accommodation on ships formerly travelling between England and India, is often put forward but lacks foundation. The main objections to this derivation are listed by G. Chowdharay-Best in Mariner's Mirror (1971) Jan. 91–2. [having, I assume, primarily to do with the dates]
[1903 Wodehouse Tales of St. Austin's 37 That waistcoat+being quite the most push thing of the sort in Cambridge.] 1918 Punch 25 Sept. 204 Oh, yes, Mater, we had a posh time of it down there. 1923 Wodehouse Inimitable Jeeves vii. 72 Practically every posh family in the country has called him in at one time or another.
posh.n.2 - [App. thieves' slang (cf. Romany posh half).]
1. slang. Money; spec. a halfpenny; a coin of small value.
2. slang. A dandy. Perh. a different word.
1890 Barrère & Leland Dict. Slang II. 146/2 Posh,+a dandy. [1892 G. & W. Grossmith Diary of Nobody 197 Frank+said+he had a friend waiting outside for him, named Murray Posh, adding he was quite a swell.]
