Easy(E), Normal(N), Hard(H), Brutal(B), Nightmare(NM)
slayernz - I'm going to give you the point on the high end game, but I'm referencing start up. I'll also note that at ~100 battles, I don't find that I totally dominate TA, but you are correct, by that time, I've got so much prestige & honor that blowing 2.5k on one shot items since I'm equipped with the finest of Templar relics, I don't truly worry about not completing a level unless I stupidly insert male generative organ into meat grinder. The limits in TA (which may also apply in ST, CK & AoP) are based more on the quality of the gear, which hits a hard limit relatively early on. I'll also note that there is no true hardcore mode in TA...after all, you can just replay the level over and over until you get it right.
fallen - You have two concerns, I'll address one here and the other in my reply to Cory. We can quibble over where to put the breakpoints or even exactly how to slope the difficulty curve, but if it is picking daisies & lopping Ratkin heads to SPLAT!,
then the curve isn't done correctly. I'm looking at 5-6 fights at easiest difficulty, about the same for the next difficulty and so on. Curve, not cliff. Five steps might be too many to easily integrate or the number of fights in each difficulty can be shorter. Comment from character: "It's going to get harder (more brutal, be a nightmare) from here on." could provide the warning. Probably a four step ramp would be easier. Fights in Red Hill (the finished bit before the caves) at N, RH caves at H up until the hund attack, rest of it at B, then full NM after the bridge.
NOTE: This is assuming you can decouple treasure & monster charts, although it might be irrelevant early on.
Cory Trese - all RPGs have a power curve inherent to them. The vast majority, not matter what they think, have a point of diminishing returns from increasing levels & abilites. IMO, the better designed ones definitely have a diminishing returns curve built into them where characters no longer get a lot stronger, but start broadening their abilities. The earliest levels are the greatest power increase overall. For example, look at AD&D (the original version). Fighters gained +1 to hit per level, which translates as +5% chance to hit. So, if the common opponent needed a 25% chance to be hit, then the next level the player gets a 20% increased in the chance to hit (25% -> 30%), then a 18% increased chance, etc. In the meantime, the Fighter was gaining bonuses to saving throws, better gear, extra skills, etc. as he levels up. If players have to face a potential ball buster in random fights, then while that does add difficulty (since you have to replay the level at least), it really doesn't add any difficulty related to skill, it is simply "did the system's dice roll bad for me". Now, while TA does have that kind of "game over dude" issue playing early missions as a new squad, HoS doesn't as much, but the effect is still there. This applies to anything I'd consider a RPG, even many "level-less" RPGs, regardless of how it tries to balance itself.
Let me ask for your internal conversation: what is the difference in the first six encounters between Easy & Nightmare, broken down by difficulty level? For the NPCs? For the players?
Where is the breakout point for the characters, when they start showing...well, "character" and not just a bunch of n00bs? (I'll submit the answer is 6th level minimum in HoS, although it is technically lower for some classes, but the lack of Talent points prior to 6th limits the ability to show "character".)
Are there ways to eliminate ball buster moments (you open the door and instead of 20 melee & 10 missile, you get 40 missile guys hammering the one in front)?
What is the average play through time to Oskahold for you guys? Double it for players (I don't count, but maybe the fact that I'm a narcoleptic and I've been known to fall asleep while my toons were walking from place to place might be a point. Yes, we narcoleptics are even more prone to zoning out doing pointless repetitive tasks than normal people.)
I'll point out a game I think did hardcore mode very well, Diablo 2. Yeah, more arcade, but... There was still a very high chance of dying the first couple of levels, but, as I pointed out above, once you got that first couple out of the way and a bit of exp & gear, then you could settle down and go for it. Yep, there were still some "oh, crap" encounters, but they were easy enough to spot and avoid or prep for. It also wasn't that big a deal to run up a new toon. In fact, with solid play, the biggest threat was lag.
Another example, Everquest. Getting to ~9th level took about a hour, getting up to ~20th took a few more (yes, it can be done faster, I took a Beastmaster from 1 to 60 in a couple of weeks, with nobody higher than 40 to buff & twink him). Seriously, 20th level was nothing, but at that point the characters were having "character".
In both cases, access to the the early levels wasn't a long process.
Given your download numbers, even if I'm correct (early PITA difficulty & timewasting /= fun), then the strength of your games hang on getting past the "pain" to the fun part. To that, I'll agree. I've enjoyed enough time in your games to think so, even the ones I didn't feel like playing into the ground. I'm going to have a lot of fun playing both of my current parties all the way through the game, but the other two variations (inserting Vincent & Selen individually into the party) aren't different enough from what I've got to be worth the low level n00b slog in the time it would take. Oh yes, I can see the fun that could be there, especially for just adding Selen, but...too much time to do the same thing over again until I get to the point where the differences between Selen & Tami stand out enough to matter.
In a nutshell, work on the slope of that difficulty curve, flatten it early.