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"Butch" is apparently an abandoned name concept for Sparkplug Witwicky's son.
At OTFCC 2004, Bob Budiansky stated that the story treatment he received from Hasbro used the name Spike. However, his copy of the treatment has the name crossed out and replaced with Buster in his own writing. Budiansky could not recall the details, but speculated at the convention that Hasbro had asked for the name to be changed.
The new name may have been Budiansky's choice, or may have been told to him by somebody at Hasbro. Nevertheless, the name "Buster" was changed only for the comics series -- in the cartoon and most other associated products, Sparkplug's son remained "Spike". (Later in the comics series a second son called "Spike" would appear as well.)
What this implies for "Butch" is that it was probably a very, very very early name for the character, perhaps sent out with the first version of the story treatment that went to licensors for use in their products. It is quite rare to come across the name.
One example of a licensed product which uses the name is the coloring book Forest Rescue Mission. Somewhat surprisingly, this book is published with a copyright of 1985 -- most errors such as name mistakes and off-model drawings are found in 1984 products which, presumably, were prepared while the names and models were still in development.