No one really knows the origin of this word. It is possible that it arose from the butter-yellow color of common European butterflies called sulphurs.
Simply aint so. I had a traditional English education, and my favorite teacher, Mrs. Harvey was a wonderful older lady straight out of the Victorian Era. She routinely called those wonderful insects "flutterbys". And think, what does a butterfly do? It flutters by.
If your Mrs. Harvey's quaint malapropistic derivation of "flutterby" is true, then why didn't the name of the insects stay flutterby instead of it being being changed to the less appealing name of "butterfly."