Actually, in a 1973 article in Cine-Action, McBride details Welles eating 8 steaks in a single sitting in Mexico in 53. And Bessy talks about a contest in Cuba in 59 where Hemingway beat Welles in a shark-fin soup contest: 12 bowls to 11 bowls. So it is plausible. It also makes sense that Welles usually entered these eating contests in America, as he was more derided for his weight problem in his home country, due to the obsession with obesity in our junk food/celebrity culture. However, there are philosophical differences between the States and Europe, the latter where he was more likely to get involved in 'macho' shooting contests, notably "fake" duels: the challenge would be made, the time and place set, and pistols filled with salt would be used. The legend persists (with strong evidence supporting it) that Welles was the unofficial salt-duel champion in England for several years running.
In fact, the male/male relationships at the centre of Welles's cinema, and so clearly based on his own repressed sexuality, can easily be linked to these kinds of competitions, in that these contests were invariably male-male. The underlying repressed gayness in Welles, increasingly seen as the very foundation of his films, is clearly expressed in the phallic nature of the hot dog competition, so I wouldn't be surprised in the truthfulness of this story. I'm just shocked that David Thompson didn't mention the infamous contest in his otherwise superb book.