To understand how Erasmus viewed Luther it is helpful to see on what topic they decidedly became engaged in hot argument against each other. The topic they chose to hurl their missiles at each other what a on their opposite understanding of the role of the 'human will.'
Erasmus was a Catholic who never wanted to separate from the stablished Catholic religion. However he was also a highly regarded academic with a strong humanistic persuasion. He was also much older then Luther, and a although not really providing Luther with any direct inspiration theologically, he did publish a Greek New Testament that Luther was grateful to have and use.
In simple terms to understand Erasmus, the idea of humanism should play central. In other word he sought to use critical thinking and scholarship along with the value of individual humanity to try and obtain a more free and liberal world that would tolerate new ideas and not just forcibly follow the dogmatics of religious powers who were at times corrupt in addition to ignorant. So Erasmus was not a regions reformer per se, but rather a Catholic with a liberal and humanistic view that naturally would like and dislike Luther all at the same time.
Luther on the other had was principally a theological reformer, absolutely focused on opposing works in salvation versus faith alone. Erasmus in some ways did not seem to want to deal directly with doctrines and theology or at least had more general interests in education and scholastic topics that had effects of humanity as a whole.
Now with these very different drivers of course one would expect some initial interest in each other and a final separation as is what history shows. Basically Erasmus encouraged people to read Luther's writings and wanted people like Luther to express their views as part of a liberalized acceptance of human opinion under a humanistic tolerance. Luther on the other hand would have loved the support of a respected academic such as Erasmus if he could only make him his disciple.
What history shows is that as Luther caused a violent political uproar over justification by faith alone, Erasmus was pressured to distance himself from Luther and finally chose the subject of 'free will' to launch an attack, writing a diatribe that implied Luther's predestination based doctrines to limit the free will of men to far and become obnoxious to the spirit of a humanist.
Luther in response wrote a book called the 'Bondage of the will'. In it he argues against Erasmus's view of a free will that is aligned with Catholic doctrine that allows for some role of works in Salvation. Luther shows that a sinner is without the ability to be real righteous or chose anything towards salvation but only the elect can be delivered from an enslaved will to one under the liberty and control of the Spirit. We need not go too deep in explaining the theology of either side, only notice that this is what Erasmus chose to take a stance against Luther, while still liking Luther in some ways according to his humanistic tolerance of ideas.
Some quotes from a summary of this dispute from a book called 'MARTIN LUTHER’S THEOLOGY, Its Historical and Systematic Development' by BERNHARD LOHSE, will help underline the points I have mentioned above.
LUTHER’S DISPUTE WITH ERASMUS
Erasmus’s Diatribe de libero arbitrio (1524)
While the debate about reforms was still going on and Luther was developing in greater detail his view of the temporal authority against opponents to “left” and “right,” the next great dispute occurred, this time between Luther and Erasmus. The dispute had to do with the starting point of Reformation theology, with the radical view of sin and bondage of the human will in respect of grace...
Erasmus advocated a Christianity reinvigorated by the Sermon on the Mount. It was not the abundance of ecclesiastical norms and regulations, and certainly not the subtleties of scholasticism that should determine the church’s teaching and preaching, but rather humility and discipleship. Erasmus held that some questions with which philosophy and theology dealt were too complex for him to want to discuss them in public. Among them was the problem of the freedom of the will.
When, after intense pressure, Erasmus finally dealt with the freedom of the will in his Diatribe, he singled out that point at which he knew he was in conscious agreement with Luther’s traditionalist opponents, despite all their other differences....
What is significant is Erasmus’s definition of free choice or freedom of the will: “By free choice in this place we mean a power of the human will by which a man can apply himself to the things which lead to eternal salvation, or turn away from them.” Erasmus argued that Scripture as well as ancient and more modern scholars hold various views regarding the freedom of the will. Against Luther he stressed that to contest the freedom of the will easily opens the door to godlessness. Since the New Testament speaks often of reward, there can be no such thing as mere necessity. Erasmus left open the question whether as primary cause of all occurrences God effects some things only through secondary causes, or whether he is omnipotent. For his defense of a limited freedom of the will he also cited the scholastic distinction between necessitas consequentis (unconditioned necessity) and necessitas consequentiae (conditioned necessity). Above all he opposed the idea that God would harden a person’s heart. For the rest, he emphasized that we owe God “all the work without which we can do nothing, and that the contribution of free choice is extremely small, and that this itself is part of the divine gift.” We may summarize his position to read that the grace of God is the principal cause and the human will the secondary cause in obtaining salvation.
Admittedly, at certain points in his Diatribe, Erasmus laid himself open to attack. His statement on skepticism is highly problematic: “And, in fact, so far am I from delighting in ‘assertions’ that I would readily take refuge in the opinion of the Skeptics, wherever this is allowed by the inviolable authority of the Holy Scriptures and by the decrees of the church, to which I everywhere willingly submit my personal feelings, whether I grasp what it prescribes or not.” Luther responded in all asperity: “Spiritus sanctus non est Scepticus” (the Holy Spirit is no skeptic). Of course in his Hyperaspistes Erasmus made clear what he meant by these unguarded statements: “It is not a matter of indifference but of reserve toward too hasty assertions, just as the ancient church reflected long before it handed down decisions, for example, in the doctrine of the Holy Spirit.” This very passage indicates to what great extent Erasmus and Luther misunderstood each other.
Luther’s Response in The Bondage of the Will (1525)
In drafting his refutation, Luther took more time than with any other polemical piece against the traditionalists....
Central Themes in De servo arbitrio
First, as to its context in the history of theology, Erasmus and Luther were aware that their dispute had to do with a problem that was repeatedly discussed and with varied results in the late Middle Ages. While Erasmus often maintained a certain distance from Laurentius Valla, Luther appealed to this Renaissance philosopher. This fact is worth noting, since Valla did not exclude the freedom of the will outright, though he severely limited it. More appropriately, Luther cited Wyclif in support of his position. In view of his infrequent references to Valla and Wyclif, the appeal to either indicates that he was clearly informed of the late medieval theological-philosophical controversy over the freedom of the will. In any event, he set his own dispute with Erasmus in this context. Finally, we should note first Luther’s choice of title for the treatise, a title that he did not explain but about the background of which scholars at that time were certainly aware. Only once had Augustine spoken of the “servum arbitrium” (bound will). By using this title Luther intended to make clear that he understood himself as defender of the Augustinian doctrine of sin and grace against Pelagians old and new. With the quotation from Augustine he was appealing to the tradition of the church fathers. (MARTIN LUTHER’S THEOLOGY, Its Historical and Systematic Development, BERNHARD LOHSE p159-160)
In conclusion: Erasmus was not a theological reformer but an 'emphasis reformer', turning away from a dogmatic religious feeling, to a humanistic one. Luther was a theological reformer that revolted from a theology that included some measure of works to obtain Salvation, to one of faith alone. This abandonment of humanity to utter filth and enslavement to sin, without any free-will remaining, that is no ability to work your way to salvation in any sense, was offensive both to Catholic dogma and humanistic feeling, therefore Erasmus and Luther parted ways. So of course Erasmus thought Luther went to far, but it was not principally in his opposition to the Pope but in his theologically reformed ideas.