Why won't my butter and milk mix when trying to make cream?
I was thinking that this is a duplicate, but I can't find an original, and somebody edited it to be readable, so I will answer. 


They didn't mix, because they can't mix. You can't get them to mix. There is no way to make whipping cream out of milk and butter. 
The milk looked that way because there were bubbles of melted butter swimming in it. 
Use it in any recipe which requires some milk and some butter without caring about the order. Pancake batter, casserole topping, etc.