"But when you take into account his low default attack power and low default health, it changes the equation a good deal."
Yes, without items..... as they are bad and no-one uses them to make up for their DGs shortcomings.
Everyone does, however what I'm saying is erebus' shortcomings compliment his skills. He NEEDS bite and health regen to compensate for the fact that he has very low health. Other demigods, have more health than he has, and so they don't need to invest as much money/slots into health as he does, and therefore they can afford to place their money/slots elsewhere. Everything has a balance or a counter.
Some demigods are more item dependant than others, erebus deffiantely is because he's a general and people attempt to play him as an assasin (the crazy good erebus). Assassins can simply level up their attack speed, damage, and health/health regen at the bottom of their tree. Erebus' bottom tree like every other general, is a minion tree. Therefore to play erebus like an assassin requires much more itemization than other demigods.
The excess money he has to spend on gear, you can spend on your citadel, and in fact that's the best counter I've found against cheesie erebus. Go for giants. Erebus' only "AoE" is his bat swarm which is really mana intensive and has a huge cooldown. Erebus can't stop an army of giants from getting to the citadel.
So like I said earlier, any demigod looks amazing if you only look at their strengths. You need to look at their weaknesses as well. Erebus has some awesome strenghts, but he also has a fair number of weaknesses he needs to overcome to make him viable. The crazy erebus' you guys are playing against are people who know erebus' weaknesses in and out, and have their item build order all worked out.