No, this is not used as another
name for a Potato but rather, in this case, a way of calling someone an idiot. It is used as an insult to someone when they make a
dumb and small
mistake.
Can, and will often, be used in it's adjective form 'spuddy'
Synonyms for spud: Spesh, idiot or muppet
Synonyms for spuddy: Daft, stupid, retarded (if you're a year 7 who just learnt what it feels like to nut) or special