1. Chanel makes clothing, fashion accessories and perfume; the lyric probably refers to aftershave or possibly clothing. The more heavily guitar-based Peel version begins with "Groovin' With Mr. Bloe," a hit 1970 instrumental recorded by a one-off studio band called Mr. Bloe. MES ad libs a line that seems appropriate for "Mr. Bloe," although the original is completely instrumental: "Baby, you're feeling the rhythm, you're moving and grooving," and the band shouts some things that sound like Spanish, and MES reponds with some gibberish that includes "Chewbacca" and something that sounds like "there's only one chef"...the rest of the lyrics are almost identical with the album version, although there is more interjected gibberish and the lines "Say goodbye to Glastonbury, I got a rabbit skull..." and "The Bank of England will see to you, their tertiary notes [or "tissue notes?"] will swirl around you."
The 2003 movie A Mighty Wind, which parodies the early-60s folk scene, contains a song called "Loco Man," performed by fictional combo "The Folksmen" (Harry Shearer, Michael McKean and Christopher Guest, who are also the members of Spinal Tap). This "Loco Man" is apparently a send-up of Carribean music as interpreted, or aped, by folk revivalists.
Courtesy of Reformation, we have the (remarkable!) lyrics to an early version "Green Eyed Loco Man" called "Iodeo":
I was doing the (deed)
All the toughs, hip, the (wait)
I felt good in my hood
It was a night of the howling mates
Night of the housemates
I felt good in my red hood
I felt so deep within my red hood
A tin bottomed (sea bottom) came out
Serpentine in a marble (sepulchre)
Chasing me up the beach
I said goodbye to my boyhood
I said goodbye to my green hood in the red hood in the (green)
The weather fantasy thrashed against
Thrashing into the rocks of reality
Red glass path
The serpentine sea came out of the sea and told me
I felt so good in my green hood
It was the night of the room mates
(Red) fantasies thrashing into the rocks of reality
The sea is in your dreams (within) the closed dreams of your dress sense everywhere (talked of)
Usually alone as possible
Scottish style (...)
Tin hat, (turn over)
And the skylights lit up on the skylight lit up on the serpentine came out of the sea
The waves crashing behind me
The (sheer) sixty in the dreams of the ten best Britons coming out of the sea
Coming up over rocks
Usually as possible
[Female voices start again]
This (caught black quiet murk)
This (caught black-side mill)
It's three and sixteen
Not not not not not not not not serpentine
It looked like a one octopus eight
I told the (wave ...)
"Iodeo: 'Iodeo,' or Iuddew/Iddew/(Iudeu according to wikipedia), is apparently an ancient name for the settlement at Stirling Castle Rock, Scotland. 'Merin Iuddew' was what is now the Firth of Forth. This may be a clue, or it may be that the song evolved away from anything to do with Stirling and that's why the title changed.
I would also add that, especially in the case of a working title, this title may not have had anything to do with the contents of the song...
Antoine points out: The "green-eyed monster" is a symbol of jealousy, I remember coming across the phrase in a variety of children's shows and books when I was young, and, more tellingly, in Othello: "O, beware, my lord, of jealousy; it is the green-ey'd monster, which doth mock the meat it feeds on." It would certainly click with lines like "Where you're standing, I don't see you/Your reflected green eyes take two foot off you."
"Loco" of course means "crazy" in Spanish, and Dan points out that marijuana is sometimes called "loco weed" (or "locoweed") and this is sometimes shortened to just "loco." MES an interview with Pitchfork:
[T]here's a lot of skunk damage in Manchester, I'll tell you that.
Pitchfork: Skunk damage?
MES: Yeah, skunk. The weed, yeah.
Pitchfork: Did you say skunk damage, though?
MES: Yeah, there's a lot of damage there.
Pitchfork: How do you mean, "damage"?
MES: Well, I've got a lot of young mates, and the skunk is like 30 times more powerful, isn't it... I'm not a pothead, you see, so I don't fucking know about it, I'm just commenting on it. It's weird, that thread, though.
The song is likely based on the verse riff of "Old Man Going" by the Pretty Things.
2. "Riddle me this" was the catchphrase of the archvillain Riddler from Batman. The Riddler was Batman's archnemesis, and he was archcool. As Danny points out, the phrase is much older than Batman:
For example: John Dryden (1693):
"Riddle me this, and guess him if you can,
Who bears a nation in a single man?"