"Intended" or not, it is the opposite of how every other game I've ever seen handles difficulty levels. It is therefore using terminology that will confuse 99% of the players (even if the dev thinks it makes sense for him).

I really does come across to the player base (and I've talked to a number of them outside of the forums) that he is antagonizing them with expectations of knowledge about an unusual rules system that makes little sense to outsiders.

If it was meant to be like the DIablo "levels", where you up your difficulty on subsequent playthroughs, this should have been incorporated as such. *Starting* difficulties are meant to be on a true sliding scale of advantage vs handicap, often just in terms of player hit points + damage, and enemy hp + damage. The items, armor, loot remain static.