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Many sources like this say that :
Landis shot the porn film within the film.
But why did director make a porn film for An American Werewolf in London? What is the significance of going like that? Why not pick any existing porn film? And why to even have a porn film in that scene?
Probably because of legal reasons and Directors Guild of America rules. The member of the guild cannot "share" the screen time with a non-union director (That's why Robert Rodriquez needed to give up his membership to make Sin-City). And finding an English porn made by a member of DGoA was probably more time and money consuming then making their own short.
In the source you provided here is a quote of Landis that he wanted character to go to the cinema in that particular spot because they showed cartoons. But many years later it changed to porn. So the movie changed but his script still stated that character goes to cinema in this particular place. So to be time and place specific Landis made a porn.
Also because of the different rating in UK and US if they used real porn they could get an X in the US.
After steelersquirrel's comment I got to know that See You Next Wednesday is a recurring gag in John Landis' films:
See You Next Wednesday is a recurring gag in most of the films directed by John Landis, usually referring to a fictional film that is rarely seen and never in its entirety. Each instance of See You Next Wednesday in Landis's films seems to be a completely different film.
But this blog present very detailed analysis of the significance of the film:
The trademark trivia often mentioned in Landis directed films, the inclusion in some form of the phrase “See you next Wednesday” is a reference to a line in the Stanley Kubrick film ‘2001: A Space Odyssey’ where astronaut Frank Poole watches a video sent to him by his wife and father on the occasion of his birthday. At the end of the video his wife says, “See you next Wednesday!” an obvious reference to their next available time to transmit a message to the distant space craft bound for Jupiter, though since Frank is killed within the next day or two by HAL, it is perhaps meant as an ironic trademark since it seems to occur in Landis films when characters are in great danger.
Same happen in An American Werewolf in London too, where David meet his tragic fate just after seeing See You Next Wednesday. Even before that a character died in subway when he pass by the poster of the film:
