A stiletto, correctly spelled, is a short dagger or a woman's shoe with a long, high tapering heel.
The "stilleto" in the song's title is intentionally misspelled to be an anagram for "St. Elliott," and thereby a play on the songwriter's own name ("Not that I'm a saint by any means," Murphy was quick to add in his Songfacts interview).
The song wasn't only about himself, though. It was also about Patti Smith.
Murphy watched Smith coming up on the music scene and always admired her performances and her writing. He offered to produce her first album, but she wasn't interested.
"I have never really had any relationship with Patti Smith on a personal level," Murphy told Songfacts
. "In fact, she never seems to acknowledge me when we are in the same room together. Not sure why."