It was not named for growing them but for the wandering peddlars who used to sell them, I think. I have forgot. Or perhaps they used to counterfeit them -- carving imitations out of wood. One historical reference site says:

"Nutmeg, the powder used for seasoning foods, is ground from the seed of the fruit of the Nutmeg Tree, Myristica fragans. A couple of stories exist as to the origin of this nickname. One story has it that this nickname came about as a comment on the ingenuity and shrewdness of the citizens of the state. In a story, perhaps originated by Sam Slick, it is claimed that the people of Connecticut were so ingenious and shrewd that they were able to make and sell "wooden" nutmegs to unsuspecting buyers. A variation on this story maintains that purchasers did not know that the seed must be ground to obtain the spice and may have accused yankee peddlars, unfairly, of selling worthless "wooden" nutmegs. It may be that these wooden nutmegs were whittled by idle sailors on ships coming from the spice island and sold as souvenirs."



A