It involved inserting "Heinekens in particularly uncomfortable places" and he offered to use the cup sponsor's product on Mr Pugh and Australian Rugby Union boss John O'Neill.
In his report, released on Tuesday, Sir Thomas Eichelbaum said it was not surprising that Mr Pugh had failed to reply to a letter from Mr Mallard, given the minister's comments.
Mr Mallard yesterday said he would always regret the comments.
The Government's response to funding the bid was also analysed in the report.
National Party leader Bill English was quick to partly blame Mr Mallard and Helen Clark for the loss of the cup after the Government refused funding in October.
"The Australian Government saw the benefits of contributing substantial funding, when New Zealand didn't. Both Trevor Mallard and Helen Clark have to take some responsibility."
Act leader Richard Prebble said the report showed Mr Mallard had "played a vital role in sabotaging New Zealand's chances of getting the World Cup".
Mr Mallard yesterday told the Herald that the Government had moved immediately it knew the sub-hosting role was in trouble.
He did not believe he needed to resign, as leading NZRFU administrators have done.
Mr Mallard said there was an obvious difference in policy between Australia and New Zealand when it came to Government support for events.
Even though the cup was worth a lot of money to New Zealand, sports organisations here traditionally preferred autonomy.
Sir Thomas said in the report that the Rugby Union had decided in August not to ask the Government to bail out the tournament - worth $99 million to the economy - but must have changed its mind because in October it did ask for assistance.
Mr Mallard had responded that there would be promotion and help with event management, but no direct Government funding.
Sir Thomas then quoted Mr Pugh as saying: "The financial benefits of the Rugby World Cup to any country is huge and only the most impecunious or negative agency would not do everything in its power to secure such an event."
Sir Thomas added that after the crisis hit in March last year, the Government agreed at short notice to underwrite any loss the union might suffer "with a maximum Government exposure of $5 million".
Mr Mallard's earlier refusal had been because the RWC would make substantial profits.
"One can see the New Zealand Government's viewpoint," wrote Sir Thomas. "Public funds should not be needed to support an event that would reap huge profits for an international sports organisation."
He pointed out, though, that the Australian Rugby Union had obtained substantial Government funding - "it seemed Australia shared Mr Pugh's philosophy".
The report showed the previous National Government had indicated it would supply funding for the upgrading of a "major stadium" but Mr Mallard said yesterday that a search had found no record of any work being done.
Sir Thomas Eichelbaum's full report
