I noticed that someone who bought the game and subsequently wrote a review actually gave up playing because of its difficulty. Sad stuff that, so here's a couple of handy cheats to get you through some of Sacrifice's more troubling missions.
Hold Ctrl + Shift, and press ~ (Tilde)
Type @, then leave one space, and enter one of these codes followed by Return:
bythepowerofgrayskull - Full Health
ihavethepower - Full Mana
dontfearthereaper - 30 Free Souls
mywingsarelikeashieldofsteel - Invincible Avatar

The game can be pretty challenging, especially if you let get out of hand.. which happens very quickly in this game.
The best advice I can give is to start playing defensively and try to take a few of your opponents souls before pushing ahead. Once you get to some of the later levels, that is about the only way you can make headway.
Also, the guardian spell is your friend. :)

The strategy that has always worked well for me is to forget about the guardian spell entirely, keep your army in a few groups guarding your wizard most of the time, except when you're moving in to attack, and use the Teleport spell when you need to defend a location.
I don't like guardian because it just reduces the number of souls you can devote to an offensive force dividing your strength.
You can also zoom the minimap using the middle mouse button and dragging up and down (if I remember correctly) This way you can see which structures are under attack easily and target them with the Teleport spell to swoop in and save the day.
It is also extremely critical to protect your own souls and target the enemy wizard so he can't collect his. The game really is about managing your souls and chipping away at the number the enemy has. This is why I like the strong ranged units (Boulderdash) so I can target the enemy wizard and then pick off enemy creatures as they retreat.

Interesting strategy. The problem I always had with the teleport spell is the area of affect. When I use it I'm normally in a hurry to get somewhere and end up leave half my army behind. I hate having to wait for my boulderdashes to make it halfway across the battlefield.
The Guardian spell does need to be used in moderation. I normally only use it on a couple ranged units so they can start causing damage early. Since the AI is somewhat predictable, I also only use it at one spot, the one most likely to be attacked by the AI.
Apeman is definitely correct about taking out the enemy wizard. Doing so will allow you to start taking his souls. I like to try to take out the manahoars as well so that it forces the enemy wizard to retreat all the way back to one of his manaliths to respawn. Just don't let your units get too far away from you.

The Teleport area of effect is an issue, a lot of times I'll need to make a quick dash back to the middle of my army to make sure I get everyone. It seems to work out for me ok if I can keep an eye on the map and see that the enemy is making an approach so I can gather everyone and be prepared to move.
Guardian can be very useful in the last level on those first two manaliths :-)

Gamespot still has a very nice game guide for Sacrifice. Very handy for planning which god you want to serve when!

The game is extremely easy if you just sit around and guard one of your towers until you have collected most of the enemy's souls. Early on in the game just attached several of your pets to the tower (this makes them very powerful but immobile), and the idiot computer will repeatedly attack you and lose.

To be honest, I didn't find it too difficult, but found I did best when I did as others have suggested, start off defensive and try to get as many souls as you can.I hardly used Guardian throughout the game, only to solidify my position, but that was where I needed them the most. Fortunately they are located very close to your altar. Even then, when I left a Rhinox the enemy still got through easily, so I had to rush back.
One other thing I would say, is you need to get stuck in yourself. It is quite tempting to sit on the sidelines out of danger and let your creatures do all the work, but once you get a good selection of spells you become the most powerful unit.

This game is brutal in the difficulty level.
I'm pretty sure that if you use those cheats you can only advance so far in the game because the GODs wont let you be their hero.
I have the original game with the strategy guide. Do you think it will work on XP?

Difficulty. From what I remember, it ranges from it being very easy on one mission, to utterly insane and hard on the next.
Might be worth a reinstall and replay, last time I was two missions away from the end and a week of no progress and I had had it.

In many missions, it's the beginning that's the most difficult because you get attacked almost immediately. If you can hold off the first few attacks, the rest is usually quite simple. The difficulty of the missions isn't really very balanced. I've completed the game with all five gods (and some combinations) and I remember Stratos' missions being the hardest by far. The one where you had to keep either of two enemies from getting 4 manaliths seemed insane at first. James was mostly pretty easy, except for the trips to Pyroborea.
The AI may seem aggressive, but I've noticed there is a way to pacify it on large maps even before its first attack: if you manage to snipe one or two of the AI's units while it's on its way to attack you, it will go into a "retreat and regroup" mode, quickly gathering its fallen souls and running back to its nearest manalith to resummon. This works especially well in the very last mission, as well as the one where you attack Pyro's capital.
If you manage to kill the AI's initial army, it tends to summon lots of weak units as replacements. Attack spells are very good against those, unlike the initial strong units.
I didn't use guardian much except in the last two missions. Sacrifice is a game that generally rewards an aggressive style. Learn to use the keybindings, especially spell tab switch (tab?), summon manalith (m), manahoar (n), heal (h) and the basic attack spell (which is not bound by default IIRC).

Come on! It's not difficult. AI is weak, and you can play offensively without caring too much about defending your manaliths and altar.

I would agree that eventually the game becomes quite easy, but initially I think it is challenging. There really isn't anything else quite like it and it does play very differently from other games. The soul mechanism really makes you concerned about your individual units (or their corpses at least!) which is quite foreign to most RTS games. I found that the single player game was great fun and gets you into the unique play style. Multiplayer is where things get interesting because you won't be able to exploit another person as you can the AI.

I agree with Canuter, I don´t think you need cheats to beat the AI, you have to maximize ur performance with spells and summon the correct creatures. There would be some hard missions (against Butta with his magnifryers!) but not impossible. If it´s very hard for you to complete the missions practise with the cheats and then continue