I just read Chapter 2 of Utilitarianism, and i still have no idea what
MIll's notion of human diginty is in relation to his form of
Utilitarianism....can anyone shed some light on this?

also, is there any other phiolospher/author that has a better argument
for utilitarianism as a standard for moral judgment???

This may be helpful:

"Like every serious ethical system, utilitarianism admits that
happiness is the end of all human action. This is something that can
be agreed upon by everyone: that we all desire happiness. But the
problem is how we define happiness. For Mill, happiness is equated
with pleasure. Granted, Mill recognizes the distinction between higher
and lower pleasures, but ultimately, because he is unable to admit the
transcendent nature of man, he has to admit that even the higher
pleasures are physical such as the enjoyment of art or music. Mill
explicitly identifies happiness with pleasure when he says, ?By
happiness is intended pleasure and the absence of pain; by
unhappiness, pain and the privation of pleasure.?[iii] The point is
further enforced when he argues ?The utilitarian doctrine is that
happiness is desirable, and the only thing desirable, as an end; all
other things being only desirable as means to that end.?[iv] Once Mill
establishes the end of human action as happiness (understood by
pleasure), it allows him to subordinate all things to this end ? even
human life and dignity. Mill?s move to subordinate all action to
pleasure as the ultimate end is very subtle and he seems quite
reluctant in doing so."

http://www.acton.org/programs/students/essay/2004/cahill.html