Wendy,
that's a surprise, I have never heard Loo, Looe or lieu pronounced that way. Up here in the North-West of England we pronounce all of them the same, with a WHO sound like Few, Dew and Blue.
However, it is the English language and the variations in spellings, accents, dialects and pronunciations make it that bit more fun, I envy foreign people who take the time and trouble to learn our lingo.
And you have to remember that the cockney accent is in a world of its own, not only have you got rhyming slang but they don't even aspirate their H's, which is a crossword compilers tool of wordplay, as in the clue,
Mammal that would be warmer in the east end of London (5)
(H)-otter