Yes, the ew wool around a sheep's butt is the original meaning I'm pretty sure. But 'dag' means sooooooo much more these days :P It really depends on the context surrounding the word I'd say. It could be used an as insult of sorts too, although I can think of far better insults ;p (dag as an insult wouldn't be too effective imho).

Oh, I do indeed find your whims and whatnot (not sure how to define your amusing posts :P) *very* amusing indeed! I try not to drink tea when I check your replies/comments for fear of me spraying it over my computer ;p

*plays icon snap*