I searched lots of places on the internet and could not find any place that had any info on the name origin. I will keep looking.
I would have thought it was a joke if I hadn't stumbled across this peak while looking at some maps. If you have any idea, you should tell us how the name came about - possibly more interesting than climbing it!
The origins aren't nearly as colorful as the name would suggest. According to "California Place Names: The Origin and Etymology of Current Geographical Names" by Erwin Gustav Gudde, Butt Mountain, creek, valley, and reservoir were all named after a miner in Plumas County named Horace Butts.