But so many people -- medieval-era, I believe -- made the "butterfly" joke out of the word, that the comedic name eventually stuck. Seriously. Look it up. I lie not! :-)
Where exactly? 'cause looking it up in an etymology dictionary gives it as coming from Old English buttorfleoge, while Old English 'flutter' is floterian. The dictionary speculates that the 'butter'-element cam either from a belief that insects ate unattended butter, or simply from the fact that most butterflies in England back then were yellow.
This post need more Funny, so here is some Stephen Fry on the subject [youtube.com].
No they're butterflies when going east to west and flutterbys only when going west to east.
Actually the name may well be be a reference to their poop!
the OED gives:
Etymology: butter n.1 + fly n.1; with Old English buttorfléoe compare Dutch botervlieg, earlier botervlieghe, modern German butterfliege. The reason of the name is unknown: Wedgwood points out a Dutch synonym boterschijte in Kilian, which suggests that the insect was so called from the appearance of its excrement.
It probably was "flutterby" hundreds of years ago then some child, presumably a King, Queen, etc. cutely mis-called it a "butterfly". A political rival of the Regent decided to correct the child allowing the Regent to have his rival executed for defying the royal child's "decree". So "butterfly" stuck 'cause saying "flutterby" is a really stupid reason to lose one's head. Or, at least, that's how I imagine it happening.