I don't see anything in that link that addresses dick pics. Is it just the fact that this "feature" only works with contacts?
Yes, which is sufficient. You can call your contacts on skype and then just show them your dick after they pick up... This is neither a Duo problem nor a common complaint (except for in regards to ChatRoulette, where it's also the USP).
http://support.google.com/duo/answer/6376115
Google knows about dick pics.