Not even sure why I took this on - I guess you peek through the grey mist for curiosity. Then for revenge, after being killed!
Ended up upgrading my crossbow to max, buying 100 heavy crossbow bolts and kindling the nearest bonfire so as to have ten flasks (I had some miracle healing, but it's kind of slow, the flasks are the fastest). If you have a couple of points of humanity, probably better to spend two of them to kindle the bonfire above the blacksmith (the one who just keeps hammering - shuddup!) rather than die to the butterfly, then possibly lose them to a slip up trying to get back to it.
Also I upgraded my shield a bit as well. Though the butterfly will tempt you to fire one to many times (probably because it wobbles up a little bit and your shot sails past it) and your guy seems to think he's in a happier, huggier game and when you hold down the shield button, he should just keep reloading his crossbow and thus take various spike blasts the butterfly pumps out on a regular basis.
Regardless in the end I recommend just shooting early and shooting often (from the far end of the walk way though, to let the spikes dissipate a bit). Some of that insects attacks just seem unavoidable - when I did kill it, it was from shooting it. Shooting it lots and lots. Till it died. Didn't let it get to that stage. Still, seems a chancy way to kill it - there's probably a more elegant method. On the other hand it worked!
Not sure if the thing at the top of the castle further on is always dead, or dead cause I let some guy out of a cage awhile ago. Curious.
* Good luck * * Praise the sun! * * Try rolling! *