The expression goes way back. In the early 40's when I was about 6, and children were to be seen and not heard, I set off a big family fight. I took a phone call from my obstreperous aunt, who wanted to complain to my mother about my earlier behavior at her house. My mother was doing laundry in the cellar, and said with exasperation, "Oh, I'm busy! Tell her to go fly a kite!" So I did.
It sometimes has the spirit of "Go to He**!," but more often, "Please go away," as GG has said.