That could very well be, Cigar Joe. In fact, I think you may have hit the nail in the head. In Spanish, given names are altered when referring to little boys or girls. For example, the name Pedro (Peter in English) can be altered to mean "Little Peter" in a number of ways, such as "Pedrito", "Pedrete", Pedrillo, Pedruco, etc. It is therefore possible that the name Benedicto would have been altered to "Benedictuco" to refer to "Little Benedicto", which ended being "Tuco" for abbreviation.
Now, being Spanish, that would make complete sense to me!!!!! However, there is only one small region in Spain (Cantabria) where "uco" and "uca" are being used for that purpose (no idea about Mexico). And, coincidentally, it was in Laredo (Cantabria) where Leone filmed "The Colossus of Rhodes". Does someone see a connection here? 
I definitely do! After your clear explanation we could assume that Leone, while shooting "The Colossus of Rhodes" in Cantabria, met a spanish guy named Tuco (somebody in the crew, or working in the hotel the movie crew was occupying, etc.) and years later, when he started writing GBU, he decided to use this name for "The ugly" character. It wolud make perfect sense to me.
