I was typing up a big, long, overly complicated message that only half made sense to me, then I found this:
http://en.wikipedia.org/wiki/Etymology_of_the_word_Jew
But no, Jude doesn't literally mean Jew. Jude is from Yehudah, from which Judah is also derived, which means 'praise; thanks'. How Jude/Judah came to refer to Jews is another story.
However, the German word for Jew is
Jude. In that sense, yes, it literally means Jew.