I know it's not the right time for any response on a thread that's almost 3 years old. Nevertheless, I'm recording my answer because of the misconceptions around the actual dialogue used.
According to the original script by Jim Thomas:
Script link - PDF
(but the actual movie dialogue adoption was cut short/ essentially condensed with catch phrases to shrink the edited final cut for theatrical screening)
SCHAEFER:
This place is too hot for a pick-up. They won't touch us until we're
over the border. We can lift at LZ 49, here.
(points to map)
Spotter plane says we're cut off.
(points to map)
Except for this valley.
Billy shakes his head, following the CONTOUR LINES of the rugged
terrain.
BILLY:
Looks bad, Major. It's gonna be a real bitch.
(points to map)
If we follow above the river and then down, here, at this canyon, we
might find a way out.
Schaefer turns to Ramirez, kneeling close by.
SCHAEFER:
(decisively)
Not much choice. Pancho, take the lead. Double time it.
So the primary connotation of the conversation between Billy (Sonny Landham) & Schaefer (Arnold Schwarzenegger) is that they don't have any choice other than the treacherous contour of the valley leading to the LZ 49 for designated rendezvous point of extraction.
Thus the implication being, as observed in most subtitle records of the movie & dialogue pronunciation by Landham
"I wouldn't waste that on a broke-dick dog"
(from a podcast upload discussing the scene, confusing the same terminology 'waste' vs 'wish') - YouTube Podcast - link
And the appendix for military glossary lists:
broke-dick ('dog' usually being a general token word for foot infantry)
(U.S.) A Soldier with a medical condition that would hinder the Soldier's ability to perform certain tasks; alternatively, equipment that is not operationally ready.
(literally meaning an ineffective person or object due to the current nature of its state)
i.e., Billy implies that the valley leading to the canyon for their exit (since they are virtually cut-off from the rendezvous LZ 49) is so horrendous but other means of exit are non-existent or impractical (like a broke dick dog - Hence he would rather take chances with this route instead as other ways are broke.) And Schaefer infers what he was afraid all along that they don't have much of a choice anyway.
Also, if the other interpretation were to be true:
"I wouldn't wish that on a broke-dick dog"
it would mean that he wouldn't want that situation for a person he pities already.
(Why would someone want to thrown a bad situation at a person that he/ she's sorry for in the first place. Which doesn't make much sense as a broke-dick dog is usually referred to an injured soldier/ marine, who's currently incapable of any action. Which is usually a sign of sympathetic sorry for his/ her misfortune being endured rather than any derogatory insult of a traitor or deserter who skips his draft responsibility. i.e., broke-dick dog = ineffective person/ object ≠ worst of an enemy)