To be honest, this sounds like an old wives’ tale. I haven’t found any evidence that flour or baking powder (the ingredients in self-rising flour) have any effect on caterpillars (or other bugs, for that matter).

It seems like you’re misunderstanding the purpose of this article. For the most part, hornworms are considered serious pests in vegetable gardens and while a few here and there usually aren’t a problem (especially if you have a thriving ecosystem in your yard with plenty of beneficial insects), an overpopulation (usually caused by lack of beneficial insects) can certainly destroy your food crops. But if you’re growing enough tomatoes and peppers to go around, then by all means, leave the hornworms alone.