What did martin luther do in response to this disagreement? What was initial reaction.

Assuming you're referring to the initial disagreements within Protestant sects as to how to deal with the Catholic Church, Luther encouraged his follows to refrain from violence, since he knew the movement was fragile and could break easily.

Referring to initial disagreements within Protestant sects as to how to deal with the Catholic Church

I believe the answer is: He nailed the 95 theses to the church door and he got kicked out

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With the theses, Luther encouraged his follows to refrain from violence, since he knew the movement was fragile and could break easily and make a case on how the act of the catholic church to sell indulgences would be considered as a sin according to bible.