Freedom Force: Third Recich.
I am within the scenario called "The Buring of Patriot City".
I've been playing the entire game within the second-up-from-easiest setting.
The villains have been mostly easy to overcome, not at all frustrating.
I realize that the game is nearly over, and that there are only a few more
scenarios to complete. However, the game has gone from a difficulty at "5" on a 1-to-10 scale, to a "96", in one step. A classic flaw in almost every computer game. The designers build in something that has to be beaten/solved through sheer drudgery and misery: Reload. Reload. Reload. Reload.
The blue and red wraiths are incredibly difficult to kill. It does not matter what combination of heroes I bring, there are just too many hit points to overcome, and too many enemies at one time.
I'm stuck with a hero I hate, Minuteman. For his three teammates, I've tried a wide variety of combinations.
Green Genie is just too weak, and her transformation spell just bounces off wraiths uselessly. Anyone who can't fly is pretty much useless, too slow. A high-powered Tombstone lasts a while but can't put a dent in the enemies. Man O War takes some damage, but can't dish any out. He can freeze someone, on rare occasions, but it doesn't last long enough, and his aim stinks. Bullet can get to the scene of action, but can't attack fliers very well.
Is the game broken, or is there a winning hero combination for this scenario?

I beat this mission using Minuteman, Man O'War, Tombstone, and The Ant.
I often use Man O'War's Bermuda Triangle ability to entangle enemies, and The Ant's Acid Bomb to do some initial damage. Tombstone is also pretty powerful, I think. I then get in close and have my heroes focus on one enemy at a time using melee attacks (which are more accurate and more powerful than ranged attacks).
I played through a bit of the scenario again just now and I focused on the wraiths first (you'll probably run into them first anyway). Sometimes, they knock themselves out, which saves me the trouble.
I pause the game frequently to issue orders. I've found that heroes keep dying if you just run in there and try to do everything in real time, especially in the later missions (though the sequel is more forgiving than the original game). Maybe that's your problem?
Also, are you playing with heroes that you've upgraded? I've been more or less grooming a specific subset of the available heroes to get them beefed up (and these also included Minuteman, who I think is a fantastic over-the-top Captain America expy).
Edit: spelling.

Keep in mind that, if this is the mission I think it is, the Wraiths become much, much stronger if you let them get anywhere near the subterrestrials. You want a support hero like Green Genie to keep the subterrestrial's disabled and unable to move while you beat up on the wraiths. The are vulnerable to energy damage, so a hero that does that kind of damage is very useful. I can't remember if you have Manbot at this point, but he would really shine here if you do.

I beat that mission using Minuteman, Tombstone, Bullet, and Green Genie. The wraiths are certainly tough customers, but they're vulnerable to electrical damage (along with radiation and energy) which can allow you to dish out damage to them quickly if you choose heroes that can do damage of these types. Also, as I'm sure you've discovered, you want to avoid going melee with them if you can avoid it, so try to choose heroes that have ranged attacks that can do electrical, radiation, or energy damage, then focus on one wraith at a time to quickly take them out. It also helps a bit if the attacks you use have a chance of stun (Genie's attacks had a small chance of stun, which I found pretty useful). Also, while the wraiths are pretty resistant to status-changing attacks, it can help to focus such attacks on other enemies around the wraiths so you can focus on the wraiths without interference (I found Genie's Polymorph to be quite useful, as it would both take out an enemy and also provide an expendable meat shield for the wraith's to beat on, and was particularly good for stopping the Subterrestrials from joining up with the wraiths to form the chaos variety).

Thank you to everyone who responded. I'm still trying, but you have to admit, the difficulty scale is way out of proportion in this scenario. Disappointing and frustrating.

No, I dont' agree. I honestly didn't find it much harder than most other mission. Of course, this game is trivially easy compared to the first one, so maybe I'm biased that way.
The key is to have the right strategy.

two months later... (as they say in SpongeBob) -- try this: click on the character portrait or the character him/herself, then right-click on the enemy (focus on one at a time). right-clicking on an enemybrings up a menu of attacks, some of which may be highlighted/starred to indicate the fact that they are effective on the selected enemy (in this case wraiths). i found the wraiths to be susceptible to status attacks, and repeatedly had them stunned, blinded, etc. (nearly all heroes, even melee merchants, have some kind of status attack)*btw, the non-wraith monsters have no ranged attack, so keep your distance and fire away. The difficulty, of course, lies in the fact that new wraiths arise after a cutscene, and you have no chance to roam around grabbing healing canisters, because you have to rush in to keep them from merging. so... right before fighting the last group of fire elementals and japanese soldiers (which has no particular urgency), run around town (especially the alleys) and grab every last one of the healing/energizing canisters and the one prestige canister (save your heroic revivals for paused combat).