Googling "chilly willy rotary dial" brings up your comment as the first result (and the only one related to the subject), so apparently no one else on the internet knows what the gag was about either
The disappearance of Lantz cartoons from television is one of the big media missteps of our time. More people seeing this clip would get the rotary-dial joke than would know who Chilly Willy or Woody Woodpecker is.
"Hey ladies, my penis only appears small when it's cold out side. After it's been in your mouth for approximately 1-2 minutes, you can enjoy all three erect inches."