I was worried that eating a lot of fat, including butter, would raise cholesterol levels or increase heart problems but apparently this isn’t the case.
Really, I think the diet thing is only very confusing if you pay attention to YouTube, newspapers, Internet forums etc etc. If you go to expert bodies, you should find that there's a massive consensus for most dietary things. Though perhaps less clarity for how you fit diabetes into the picture.
The massive expert consensus is that saturated fat, very much including dairy fat and particularly butter, does increase "bad" cholesterol and that this in turn is bad for your heart, arteries etc. But part of the (manufactured, IMO) confusion turns on: compared to what?
Compared to refined carbs, saturated fats are pretty much a wash for heat etc health. Replacing Frosty Flakes with full-fat cream or bacon for breakfast will maybe make little difference for heart health, may be more nutritious in general (calcium, protein, B12 etc) and will likely be better for blood glucose.
But replacing unrefined carbs like fruit and oats with bacon is amazingly risky, from a heart etc health perspective, and while on the day you might see lower BG, longer term the BG benefits are not likely to be very much.
The point is that in dealing with T2D you really have to deal with both BG and cardiovascular stuff.
Again in Mr Nerd mode, this from the American Heart Association is an excellent review of dietary fat from an up-to-date mainstream perspective:
https://www.ahajournals.org/doi/pdf/10.1161/CIR.0000000000000510
In summary, randomized controlled trials that lowered intake of dietary saturated fat and replaced it with polyunsaturated vegetable oil reduced CVD by ≈30%, similar to the reduction achieved by statin treatment. Prospective observational studies in many populations showed that lower intake of saturated fat coupled with higher intake of polyunsaturated and monounsaturated fat is associated with lower rates of CVD and of other major causes of death and all-cause mortality. In contrast, replacement of saturated fat with mostly refined carbohydrates and sugars is not associated with lower rates of CVD and did not reduce CVD in clinical trials. Replacement of saturated with unsaturated fats lowers low-density lipoprotein cholesterol, a cause of atherosclerosis, linking biological evidence with incidence of CVD in populations and in clinical trials. Taking into consideration the totality of the scientific evidence, satisfying rigorous criteria for causality, we conclude strongly that lowering intake of saturated fat and replacing it with unsaturated fats, especially polyunsaturated fats, will lower the incidence of CVD. This recommended shift from saturated to unsaturated fats should occur simultaneously in an overall healthful dietary pattern such as DASH (Dietary Approaches to Stop Hypertension) or the Mediterranean diet
So in simple terms: Avocados, nuts, seeds etc as sources of heart-healthy fats, plus minimally processed plant-based carbs. Maybe a moderate amount of preferrably low-fat dairy for protein, calcium etc. Fish (best) and a moderate amount of poultry in preference to red meat.
Circling back to the T2D question: how do you fit it in to these types of guideline, which always call eg for an increase in whole grains and fruit as sources of heart-healthy carbs and fibre? Personally, bread of any kind is my Nemesis as far as BG is concerned (also pasta and rice, but I never ate as much of these). And I have a suspicion that eating bread might have given me diabetes, rather than my diabetes causing my sensitivity to it - many non-diabetics display a similar sensitivity.
My solution was to cut way down on bread and replace it with seeds and more nuts. This, hopefully, gives the same fibre and other nutrition benefits as whole grains without the BG effects. Radically cutting fruit never made any sense to me for overall health but I did cut back portion sizes for a while.
Anyway, a tedious thing about T2D is that you do have to put some work into this stuff, and the official diabetes-specific guidelines are sometimes not hugely helpful, but following up-to-date expert general nutrition guidelines (rather than YouTube etc) plus individual experimentation can allow you to map out a good path forward.