If anyone wonders how bad things are they might want to think about the fact that creating an environment where this sort of thing doesn't happen is seen as a lofty goal.
If anyone wonders how bad things are, they might want to think that talking about sex is inappropriate in public, even though it's the most essential driver behind human behavior and, if you believe books, only one person on Earth was ever born without someone, somewhere having sex.
This isn't "talking about sex". It's making comments with obvious innuendo that is not really funny. The net effect of this is to make many people feel unsafe and unwelcome.
I respect that many people have the ability to ignore this "noise", but we shouldn't have to.
It's funny if you like that particular type of humor. I find penises funny, and I can assure you many other people do too. Maybe exactly because of the inappropriateness, I don't know. They're just now doing research of jokes and humor.
Otherwise, I fail to understand how the sexual innuendo would make her feel unsafe or unwelcome - it was a joke between friends and it wasn't even remotely targeted at her.
Even if it was, offering someone your huge dongle is probably the most welcoming thing you can do, ever. It's not noise, it's a compliment.