::I'll give it a try, if no one minds.  This is my first time to look at the Sadasivan; I was aware of the dust-up before, but, as far as I recall, never commented on it.  I think that, first of all, whatever we make of the account on page 328-9 (the story Chekon quotes in the archive linked above), I think we also need to take into account the story told on page 150-151; if anyone can't read that in their google books version, let me know and I'll retype the whole thing; a quick summary of my interpretation is that it was a positive term, likening the people to dogs based on the quality of loyalty. This is similar to the Kerala-jatyachara-nirnayam, in the same way that likening someone to a lion is a way of emphasizing their strength or leadership.   
 ::Okay, back to the 328-329 story. Here's my interpreted summary: "Some Naga girls made 3 images of a dog, and brought them to life through magical means. 2 of the dogs ran away.  One stayed; that one the girls offered to Vishnu. Vishnu gave that dog to Ayyappa. That dog stayed with Ayyappa.  The only people who gave the dog assistance were some Shudra (they used to go hunting with it, to aid Ayyappa).  Because Ayappa was pleased with their assistance and good treatment of the dog, he named those Shudra Nayar."  Before I even think about transforming that into Wiki-prose (and shortening it in the process), does anyone think I've got the summary wrong.