The earliest known example of the phrase dates from 1639, in the form "Faire words butter no parsnips". Anybody who has ever eaten boiled parsnips knows that they cry out to be glazed in butter before serving, and in traditional English cookery they invariably are - it is a necessary part of their preparation. The point of the phrase is that words alone achieve nothing - a person may "butter you up" with fine words, but he can't butter parsnips with them!
http://www.phrases.org.uk/bulletin_board/52/me ssages/509.html
Nigel Rees, in Oops, Pardon Mrs Arden!, quotes a stanza from Epigrammes of 1651 by a Thames waterman known as the Water Poet, John Taylor:
Words are but wind that do from men proceed;
None but Chamelions on bare Air can feed;
Great men large hopeful promises may utter;
But words did never Fish or Parsnips butter.
This shows that other foodstuffs were involved in the saying at that time � indeed there�s an example in the OED from 1645: �Fair words butter no fish�....
http://www.worldwidewords.org/qa/qa-but2.htm