A writer in "Western Folklore" in 1963 reported that an unidentified somebody told him he'd heard the phrase in a vaudeville show in Des Moines, Iowa, between 1906 and '08. He remembered it as "Aha, she cried, and wagged her wooden leg." One of source's two sons recalled the same thing with "waved," the other with "waved" and the addition of "and rolled her eyeballs." The second son remebered it from a vaudeville show in Minneapolis-St. Paul in 1928 or '29.

The Irish writer Sean O'Faolin has the saying in his 1934 novel, "A Nest of Simple Folk":

"Hurrah, she cried, and waved her wooden leg, and down she flopped, and the band played 'God Save Ireland, said they, proudly.'"

Elsewhere in the same book is a shorter version, "...her wooden leg, and shouted, God save Ireland.'"

My guess: it started as a vaudeville parody of the line McGrath cited here a while ago from the once well-known sea song, "Black-Eyed Susan."