Apparently most males with this condition are sterile http://www.digitaljournal.com/life/health/rare-medical-condi...

I remember reading in a book (I can't remember which one) that they had penises albeit smaller than average. It makes sense because a normal penis goes through two growth spurts and this one doesn't benefit from one of the two.

Assuming they can... otherwise this mutation would have died out quickly enough ?

it could be carried by X chromosome.

Assuming it's not caused by environmental factors (e.g., pollutants, toxins).

The article describes the location as a small, isolated, village. Pollutants & toxins aren't necessary, just good old genetics.