Shakespeare was by no means averse to sexual puns, euphemisms and allusions. In fact Shakespeare's Bawdy by Eric Partridge is a classic of Shakespeare scholarship entirely dedicated to this sort of language. Interestingly, the glossary section in Partridge's book doesn't have entries for "dagger" or "sheath".
The Romeo and Juliet editions by T. J. B. Spencer (New Penguin Shakespeare, 1967, revised 1996) and G. Blakemore Evans (New Cambridge Shakespeare, 1984) do not mention double meanings of "dagger" and "sheath" in their glosses of the passage, but that does not conclude the matter. There is debate on whether the verb should be "rust" (as in the 1599 Second Quarto and the 1623 First Folio) or "rest" (as in the 1597 First Quarto):
O happy dagger thou shalt end my feare,
Rest in my bosome, thus I come to thee.
The First Quarto is of such poor quality that it is not used as the starting point of modern editions but some still prefer "rest" of "rust". Blakemore Evans describes "rest" as "a blander and easier reading" (page 189), but an additional note on this point (page 207) adds,
(…) The objection that a dagger 'rests', not 'rusts', in its sheath (…) is beside the point considering the nature of the present 'sheath'. Gibbons suggests a kind of phallic fulfilment in Juliet's action, completing 'the motif of Death as rival to Romeo, Death lies with Juliet'.
Jill L. Levinson notes in the Oxford edition (page 349) that,
the dagger in its spoken and material forms has most impact as part of the sexual wordplay in Juliet's last lines.
None of the editors cited above mention whether pre-Freudian theatre goers would have picked up the sexual allusions in "dagger" and "sheath". They also don't mention when commentators first started interpreting Juliet's last words as sexual allusions, which is a question that may be worth investigating in its own right.
However, the verb "die" in the sense of "to experience sexual orgasm" (E. Partridge: Shakespeare's Bawdy, page 93) occurs elsewhere in Shakespeare. For example in Much Ado About Nothing, Act 5, scene 2:
I will live in thy heart, die in thy lap, and be
buried in thy eyes; (…)
And even in King Lear, Act 4, scene 6 (at least according to Partridge):
I will die bravely, like a bridegroom.
The above comments on "dagger", "sheath" and "die" provide arguments in favour of the presence of an erotic allusion, but this does not imply that this is intended humorously.
With regard to the dictionary where someone wrote "vagina" next to "sheath": Wiktionary points out that "vagina" is etymologically a
Learned borrowing from Latin vāgīna (“a sheath, scabbard; a covering, sheath, holder”).
Native speakers of Dutch will also know that schede can be used for both "sheath" and "vagina". The same is true for the German word Scheide. Gefundenes Fressen for Freudian translators.