Why was "Destroyer" toned-down from "Barbarian"?

Yes, Dino wanted the sequel to be less violent. Destroyer sucks extremely badly compared to the original. But Destroyer is a bona fide masterpiece when compared to the 2011 Momoa abomination which is one of the worst films of all-time.

Conan the Destroyer was released in the summer of 1984, and the producers, I presume, would have lost revenues if they'd made it an R-rated film. (I notice that, according to this site, the first film was also a summer release — May of 1982. Perhaps they felt they lost revenue and wanted to compete with the bigger franchises like Temple of Doom (1984) and Return of the Jedi from a year earlier.)

I was a bit disappointed by the lack of T&A in Destroyer... ;)

Arnold talks about this extensively in his autobiography, and lays the blame squarely on the studio, Universal.

He says Universal cut a lot of violence from Conan The Barbarian, and after the movie's success, they stepped in and took more control of producing the sequel. They "had E.T. on the brain" and wanted a family-friendly PG film in the hopes of making more money.

Arnold objected, saying Conan's appeal had nothing to do with being family-friendly. It would alienate the true Conan fans and destroy the frachise they'd hoped to create. He didn't want to do it, but was bound by contract to reprise his role.

Destroyer sucked. Conan isn't "family friendly" from the start and in order to make him so, they had to compromise his character badly.

Conan the Destroyer could more aptly be titled "Conan II: the Franchise Destroyer," since it killed any prospect of a Conan III, and is a textbook case of studio interference ruining a movie. This is a problem inherent in the movie industry (some of the time, at least -- there are examples of studio interference actually helping movies from time to time), where you have the men with the money insisting on changes, despite not understanding the first thing about the character, or the genre, or message, or some other aspect of the movie.

Conan the Barbarian was a serious movie, somewhat dark and contemplative in tone, which is natural since the plot revolves around a quest for revenge. Conan the Destroyer, is light, family friendly, with a number of scenes thrown in for deliberately comedic effect, and complete with a buffoonish sidekick to provide comic relief. I get the feeling that Richard Fleischer, and perhaps some of the studio executives who dictated how things were to be done had, perhaps, thumbed quickly through a few of the Marvel Conan comics, and their familiarity with the character didn't go one inch farther than that -- for example, they dressed Conan in the comic-trademark fur loincloth, rather than the assorted outfits and armors he wore in the first movie. And where Milius had Schwarzenegger slim down a little (I read that he actually dropped about 30 pounds), so Conan wouldn't look too much like a product of a modern gym, Fleischer had Arnold pack on the muscle. Where Milius treated the character and story seriously as befits a hero of myth and legend, Fleischer as I mentioned, played many scenes in the sequel for laughs, and the whole film comes across as a light comedy with a little action thrown in. In short, Fleischer looked at almost every good directorial decision Milius took, and then did the polar opposite.

As Thulsa Doom said: such a waste.

They didn't just go PG, they gave it half the budget of the first movie too. This was the era when sequels were cash grabs. Nobody cared about franchise building.

In theory, less violence meant a PG rating which meant more kids could see the movie which would cause it to make a lot more money. In reality, it did not happen.

Well once upon a time, Arnold was just some asshole and this was just some movie and the studio was trying to make more money. Nobody was trying to create legendary art.