I think it was a real dog. And I think the name Muzzy does refer to the dog, a take-off on Mussolini. Earlier in the film, we see her walk three dogs, so keeping the name Muzzy in the film might have been an oversight, or they might have thought that viewers would think Muzzy and Tarzan were two different dogs.
She was actually walking 4 dogs when she got out of the elevator. She also refers to herself as Muzzy (Momsy is what CC says).
She calls herself Muzzy while apologizing to the dog, then refers to the dog as Gandy when she says "I'm sorry Gandy".
She says, first referring to herself, and apologizing to the dog, "Aahhh, Muzzy's sorry. She doesn't give a darn for the old man's carpet. No Gandy, I'm awfully sorry Gandy".
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