I'll try to keep this short.
"Live rock" is not actually live. What the name suggests is the rock already is "cured" (anything that would die on the rock has already done so) and comes with nitrifying bacteria already built up in the rock plus some hitchhikers. No fish/inverts live off that bacteria. Your Copperband is picking at the live rock to eat all the hitchhikers that are living on the rock. Could be a number of things, amphipods, copepods, sponges, or numerous other things, since as algae, which would be a good thing for the Copperband to eat.
Copperband Butterflies are definitely capable of living in captivity. They are not the most disease resistant, and they do not take to mishandling very well (i.e. shipping) and it may that some time to recover. The other big hitch to keeping CBB's is they do not take to prepared foods very well. Their natural diet in the wild is clams/other molluscs.
Try a nice mixed diet, mysis, cylcopeeze, grated scallops, finely diced clams, bloodworms, and blackworms. If he doesn't take (give him 5-7 days, feeding everyday), you will have to resolve to adding pieces of clam around the tank to recreate what it would naturally find. I found that a large sponge (like the type that covers return pumps) is great for this. You can add several pieces of clam, weigh it down with some spare rubble rock, and add it to the tank.
Hopefully that clears everything up.
