I reckon it's bollocks. There are hundreds of millions of slim and skinny guys in the world, and if this theory held any truth, the official average penis size would be considerably bigger. I'd bet that if you lined up 100 skinny guys, most of them would be average length or less. You're obviously going to get guys on LPSG who fit that bill, but that doesn't realistically even scratch the surface of what the majority of men have in their pants.
Mathematically incorrect. Tall guys are outnumbered by guys of average height, plus there are plenty of short guys, to counterbalance any raise in penis size that occurs (remember we are talking about overall correlations) from tall guys (who tend to have longer penises).
Also, pubic fatpad affects the amount of penis length showing no matter what one's height is. Thin guys will tend to have thinner pubic fatpads, as a result more penis is visible.