What is/are needed ...

You are correct, and although your justification sounds ungainly, it is essentially correct. Sometimes it helps to rearrange the sentence:

Milk and butter are what is needed.

It might more immediately make sense once you have rearranged the sentence.

Hi Setanta

You are correct, and although your justification sounds ungainly, it is essentially correct. Sometimes it helps to rearrange the sentence:

I cannot get what you're telling me.

Are you saying "Who is ... " and "What is ..." are not similar in usage.
Who is at the door? (There may be five people, but we still use 'is'.
What is needed for baking a cake? (Different things are needed to bake a cake, but we have to ask, "What is needed for baking a cake", NOT "What are ... cake? Am I correct?

Many thanks.

I only observed that your example sounds ungainly, it didn't say it was ungainly. At any event, it simply sounded odd to me, but it is correct, something which i also pointed out.

Thanks, Setanta, for the clarification.