Make sure you actually feed the lizard doggo. I thought I had the same issue (I play on ESDF rather than WASD), but the real issue is just that the prompt text comes up whenever you are near the doggo. In my case there was a doggo that was glitched against the terrain and couldn't run away from me, so I was able to approach it and see the prompt. It wasn't until I went on the subreddit and found that you have to walk (sprint scares it away), hold berries to lure the doggo, and drop a berry to feed it, that you can pet it.
As far as the text displaying E, that's a separate issue. The mixup comes because the the prompt text is set to say "E", and doesn't look for whatever is bound to the interact key. The same problem happens with the tutorial prompts (press "F" to enter deconstruct mode, but I have it bound to "G").