if you think about the butterfly effect, calling it schmetterlingseffekt just sounds way more badass :p
but you are right, schmetter does not originate from "smasher" (as i and probably most german speakers assumed), but instead from "Schmetten", which means butter or cream.
this also means that this word is translated perfectly,
but the german word has a whole different meaning nowadays,
i personally have never heard the word schmette.
thanks for the motivation to look at this, feeling a bit smarter now and finally know why the schmetterling is called butterfly. :)