Following up on tsuwm's note, with a look at on line dictionaries. AHD lists p*tz with only the yiddish-rooted meaning, ignoring the Pennsylvania Dutch. Also, AHD gets both the meaning and the etymology wrong. It states:

http://www.bartleby.com/61/6/P0680600.html:
(A) NOUN: 1. Slang A fool; an idiot. 2. Vulgar Slang A penis.
(B) INTRANSITIVE VERB: Slang To behave in an idle manner; putter.
[note that tsuwm, correctly, does not cite this latter meaning.]
ETYMOLOGY: Yiddish pots, penis, fool.

This etymology is suspect on its face. We are told that although putz has meaning (A) both in yiddish (Rosten) and english (AHD), the english version stems from a different word "pots".

The accurate detangling is as follows: yiddish has two separate words, putz and potz. The former yiddish word has meaning (A) and has come into english with that meaning; in neither language does it have meaning (B). The latter yiddish word has meaning (B) but has not been picked up into english.