That bit about him not wanting to wear the Purple Heart because he didn't want anyone to know where he was wounded, etc. was made up for the movie. It's not in the novel.
Could it be he was "unmanned" in the war?
Nope. It's mentioned in Chapter One of the novel the movie is based on, (
Wise Blood
, by Flannery O'Connor). Haze says the army sent him halfway around the world, and he was wounded in the chest… they told him they took the shrapnel out, but he mentions they never showed it to him, and he claims he still feels it in there, rusting away and poisoning him.

I doubt he would be wearing his uniform if he was section 8 or AWOL; I was thinking Motes definitely had some PTSD issues.
donkeywranglertothestars.com
@sly_3

i think he wanted the shop owner to believe something like 'shot in the backside' but from the way he said it, and the crazed look, i'd say he was mentally damaged. i found humor in thinking that that is what he really meant.

Interesting reply.. Yes, I to was puzzeled, as it very much imlies he had been imasculated. I guess he could still visit the prostitute for the pleasure of seeing and touching her..
But I liked the sugestion of being shot in the backside
few visible scars

I took it to mean that he was shot in the a** , which might look as if he was running away from the enemy.

The book doesn't say anything specific, just that the war had done something to his insides. I'm sure it wasn't as embaressing as he was about it.