He's really just 'bigging up' his own role as a movie director. Good luck to him. He's not saying anything that others haven't said about Andy, David Bowie included, and that Andy didn't say about himself. He said of himself frequently - There really isn't anything there. I want to disappear completely.
Of course, the flip side of what Morrissey is saying in the clip above, is how smart Andy was, that he got other 'clever' people to do everything for him, and stuck his name on it. Who was 'using' who?
I would imagine that being there with The Velvets was a bit of a 'shit show'. They were one of the first 'punk' bands in many ways. A mess of drugs and noise. I can't imagine there was much 'great' about them at the actual time of being there, when seen up close. And Morrissey saw them up close. 'Greatness' is a label that comes later with the critics. I don't think his bitchy nickname means anything more than that. It's kinda funny really. Those 3 VU albums will be listened to for as long as people listen to music. No amount of bitchiness and bathos on his part can take that away.