i saw an interwiew with Trey and Matt on Butters and they said that he was based on their staff member and friend Eric Stough and his voise is basicly Matt making fun of him. They called him their buddy, their little buddy, their butters. and that's where his name came from!
The real reason why is because of Eric Stough animation director and producer of south park because The nickname Butters evolved from Parker and Stone calling Stough "little buddy or butters for years