What is the ruling on melting food butter to use it as hair oil, and is it permissible to wash it off in restrooms if that is permissible, taking into consideration the use of olive oil for both purposes?

There is no harm in treating hair and skin with butter, oil, and similar foodstuffs. There is also no harm in washing the body from the effects of the oil after its purpose has been served. This is not a destruction of foodstuffs; rather, it is the removal of something that no longer has a benefit.