According to Rogers "Profanisaurus Rex" the hogs eye is that male orifice through which urine and sperm erupt, I've also heard it refer to female genitalia because of the lush eye lashes possesed by most pigs (hogs)but I can't give you references for that other than Lancashire coal mines circa 1956.
I can see sailors on inland waterways being called "Ditch-hogs" (Terry) but where does the hogs eye come in? Also a careful reading of Hugill indicates that he doesn't know wether the meaning was obscene or not, he only points out that Terrys' explanation is not obscene, while he admits that the verses were indeed indecent.I think it unlikely that the verses should be obscene and the chorus not.