I have just started a new game after completing the first run through and am finding it impossibly tough. I'm playing on the second level up so it shouldn't be that hard. Can I set the level of challenge lower on GOG Galaxy using my new game or will I have to start yet another game?

Go into the main menu, select gameplay. You can adjust the difficulty there.

Edit: typo.

I'm playing NG+ on death march and i don't find it that hard

I'm lvl 34 and playing with this build

http://i.picpar.com/rW3b.png

Full mastercrafted ursine armor set and weapons

Hmm.. i found it to be easier than the previous run (both on Deathmarch).
At least after i remembered that wolfpacks CAN be a threat ;)

I know you could ajust the difficulty during the previous run through, however, there is no longer the option in my menu! I am begining to wonder if my Galaxy has become corrupted. When I say it is hard I mean, the Bloody Baron beat me to death twice, with his fists! It took only about 10 seconds!
That is just one example but it illustrates the problem. I also have fully mastercrafted and enhanced equipment and I'm now level 39. I am wondering if it's something to do with the "Alternative movement" DLC pack! I will try playing without it and see if it helps. Other than that I may reinstall the Galaxy client, it keeps trying to update itself but then I get an error message. Maybe the levelling needs something else that I am missing!

I am playing with all dlc and alt movement enabled and still have a difficult slider under options.

I think the intention of the ng+ mode was, in part, to increase the difficulty.