Difficulty in games is a contentious issue at any point. Brian "Psychochild" Green recently had a musing on the topic of difficulty as it applies to most games, but even that discussion stops shy of discussing MMOs, where multiple difficulty levels are rarely an option. Designers can make harder events, but if the rewards are the same as something easier, no one will bother making life harder on themselves. That makes the "hard mode" more than just an increased challenge, and sets up a hardwired and sometimes arbitrary challenge-to-reward ratio. On the flip side... well, it's not fun to have the game just hand everything to you. We want to feel as if we're accomplishing something when we play.
So today, we ask you, what's too far in either direction? What sort of penalties or challenges make something so ridiculously hard it's not worth bothering? By the same token, how simple does something have to be before you're annoyed at the ease of it all? What levels of difficulty can be tinkered with without making the game unpleasant, and what elements of gameplay are best kept at a set level?