TL/DR: It's more probable that the name really derives from butter because other Germanic dialects relate the insect with diary products as well. To explain why, the Brothers Grimm suggest a connection with an ancient folk belief.
Long answer:
There are similar expressions for butterfly in other Germanic languages and dialects. The Deutsches Wörterbuch (1854–1961), which was initiated by the the famous linguists and folklorists Jacob and Wilhelm Grimm, has in its entry on Schmetterling (German for butterfly):
eine gruppe von namen, die besonders im nd. und md. gebiete heimisch sind, setzt das thier mit butter, milch, molke in beziehung: buttervogel, butterfliege (vgl. ags. buttorfleóge, engl. butterfly)
My translation:
a group of names that are particularly native to low German and middle German areas relate the animal with butter, milk, whey: buttervogel [lit. butterbird], butterfliege [lit. butterfly] (cf. ags. buttorfleóge, engl. butterfly)
The entry mentions more regional names for butterfly, including molkentöver:
der ursprüngliche sinn dieses molkentöver ist 'molkenzauberer' [...]. eine alte vorstellung des volksglaubens liegt hier zu grunde, dasz hexen die gestalt von schmetterlingen annehmen und in dieser verhüllung einem ihrer hauptgeschäfte, dem verderben der milch- und buttervorräte nachgehen.
My translation:
the original meaning of this molkentöver is 'whey wizard' [...]. this is based on an old folk belief that witches take the form of butterflies and pursue, in this disguise, one of their main businesses: spoiling milk and butter supplies.
The entry also includes references to the Brother Grimm's folklorist research:
vergl. hierüber Grimm myth.4 897 und weiter über die bedeutung des schmetterlings im volksglauben ebenda 905, 691, nachtr. 247
cf. on this Grimm myth.4 897 and further on the significance of the butterfly in folk belief ibid. 905, 691, subsequently 247
Sources:
„schmetterling, m.“, Deutsches Wörterbuch von Jacob Grimm und Wilhelm Grimm, digitized version in the dictionary network of the Trier Center for Digital Humanities, Version 01/23, https://www.woerterbuchnetz.de/DWB?lemid=S13715, retrieved on 07.05.2023.
Jacob Grimm: Deutsche Mythologie, available online at Projekt Gutenberg