Naming that thing a "Dago sandwich" sounds like an insult to Italians everywhere--though given the fact that the Midwest is the land of meatloaf, perhaps it is an attempt to be inclusive;-)

Dago does seem to be derived from Diego--Southern Italy,centered particularly in Naples and Sicily, has always had close ties with Spain, the rulers have often been Spanish(the Borgias, for instance) and the Italians, particularly from the North, have tended to regard the Spanish as dirty and uncivilized--

"Wop" seems to come from the word "guappo" which is a slightly derogatory term for a dandy--

Italian-Americans don't seem to mind hearing the word "Dago" as long as it is not aimed at them in malice(believe me, I've got a lot of family in Hoboken)--They don't use that word much, or "Wop" for that matter, but they do use "ginzo" a lot, and it has a very specific meaning--