I'll keep this short, because it's really getting late
First off, I actually aggree with you. I, personally, want a challenging AI and a game that doesn't hand everything to me just like that. I like being challenged and being rewarded for overcoming a challenge.
However, as you mentioned yourself (in the bolded part), there are people who don't like that. And, from my experience, those are the guys that make up a large chunk of the sales of, well, any game, nowadays. All a game that was actually challenging (especially if it was challenging to the likes of us, who are, without a doubt, above average) would achieve would be a lot of grieve by a large part of its audience. That, in my opinion, is why 99% games are so easy in this day and age. Plus, another thing I'd like to put out there: Average Joe doesn't want to play on "easy". He doesn't want to play on "medium", either. He wants to play on "hard", because no matter what, he'd rather complain to the developers than accept that he doesn't have what it takes to beat the game. I know, it's a bit of a "that's why we can't have nnice things" rant, but I actually feel that way.
I agree!
I see this as a (software) generational thing, personally. I grew up with games that made no bones about kicking you in the balls, and you had to man up and deal with it in order to progress. Even then, there were exceptional games which got a reputation for being utter bastards! Those sorts of games simply aren't fashionable anymore; well, not in the same way at least.
Of course, back then there were fewer big releases, much less money involved and a completely different demographic of people who had the equipment to play games. (Not to mention the social stigma.)
So now we're stuck in this vicious cycle where nobody wants to break with modern "tradition" for fear of criticism. Because nobody wants to do this, games will continue to suffer the same problems. Frankly, if people can't play a game on "hard", they need to deal with that themselves and accept that they have work to do regarding their skills. It's like going to McDonald's and not being
allowed to order a "small" anything - it's just a label, it's pathetic.
I don't see the need to dress it up to boost people's egos for no good reason - you mentioned Tetris earlier; I suck at Tetris. Naturally, my first response would be to say "the game sucks" but that's just normal human behaviour, and I know that it's really just me, if I were to be honest about it. It's also like the "X-Factor effect": if everybody tells them they're amazing right up to the big judges, no wonder they're crushed when they hear the cold reality.
Games today are trying to cater for everyone in their
marketing; "we have casual features, but we've got some hardcore stuff for those that want it" this is absolutely fine, and is a must now for most big budget games. But we've often seen the reality of what actually goes into the game, and the "hardcore" side often disappoints. Granted, this is usually because there are a million and one different types of hardcore.
This is why, I think, discrete intervals of difficulty are pointless, outside of the recognition factor and "ease of use". I've been playing through Doom again recently (a game I used to "have to" play on "God Mode") and it has
five difficulty settings, which I would arbitrarily regard as a minimum. Doom does it the hard way, though, with "hard-coded" differences such as the numbers and types of monsters in each map, with only the opposite extremes changing damage, monster speed and respawn and ammo abundance (just numbers).
In a racing game, you can have a
slider for AI speed (in fact, that's how it's done on most PC sims, although the ranges are often inadequate). Sure, you can leave easy / medium / hard etc. as presets, but also allow for custom settings! It's not like the AI only exist in discrete intervals of pace, since I'm sure their raw speed can be represented by (a handful of, non-integer) numbers rather than mere descriptive terms etc. Of course, there are potential balance issues that can arise, but I don't see how that's any different to the "critic's" skill level being completely mis-matched (either way) to the game anyway...
I could go on for days about this, in my typically incoherent manner, but to do so would mean I'd be better off designing my own game, which is a road I'd best stay away from lest I become obsessed. That's a great idea for monks, actually - I'd bet they could make kick-ass games, like their beer!
