小 means small, and 字 means basically letter (as in letters of the alphabet.) I don't know know what the option does in your specific game, but I hope this helps somewhat.
I have never heard AMEKO, but it could very well be a rude way to say American. There's a word, POLIKO (or more accurately, POLIKOU) used sometimes to refer to the police. POLIKOU is written ポリ公 I believe, so if AMEKOU is a real word, it would be written アメ公
And yes, it would definitely be rude. Especially to yourself, but I think this is exactly what you're looking for.