Serious rpg game? All Divinity games have weird humour in them. I doubt Larian employees take themselves too seriously. Heck, just look at their logo.
It's just dirty underwear, and like Gyson said, there's a valid reason this item exists. It needs to be smelled by a dog. If it was a freshly washed pair of panties, then it'd be quite useless.
About the dragon piss, it's not uncommon for specific low quality brands of beer to be called piss. It has nothing to do with urine.
I get the feeling you take life way too seriously. Lighten up!
