Emily asked this question in the episode where Richard is in the hospital in Season 7. Yes, typing that was a lot easier than looking at the episode title. Of course, I was curious, because it’s candy. Why do they call them Milk Duds?
So I went to wikipedia & apparently the manufacturer said the milk part is because there’s a lot of milk in it. However, Milk Duds were originally supposed to be perfectly round. This was impossible, hence the dud in milk duds.