The problem with the argument that if x exists, then x+1 must exist, is that it becomes exponentially less likely that something will occur the further it goes from the mean. Beyond that, there are definitely biological limits to how big something can even be. It's like how there are guys who are 8 ft. + tall, but a lot of them walk around with crutches. A penis too big to work is about as immediate an evolutionary dead-end as there can be, so there's a hard ceiling on that.
The natural selection for penis size isn't that surprising. Most mammals will have a penis that's proportional to the vagina, and the vagina is in proportion to the birth-weight of their young. e.g. chimps are incredibly sex-driven close cousins to humans; their babies are roughly 4 lbs at birth, while humans are 6-7lbs. Chimp penises are about 8cm long, while humans are about 13cm. Gorillas are only about 3cm long, and their babies are the lightest of all. Humans have a high birth-weight because we have big brains (which don't grow very much from the time we're babies.)
Big brain -> big vagina -> big penis
We're not even sure if the genes are distinct - it would make total sense that the genes that effect some parts of genital size would be the same for male + female genitalia.
We can't compare directly to non-primates, but if you look at other mammals it holds true there too. Horses have penises the size of a man's arm, and their foals are born very large + developed, able to run shortly after birth.
