Does anyone know the difference between the difficulty settings? Also is it possible to change difficulty mid game, or does changing the setting only apply to new games?

Hello. I played in Arcade mode for the first time, and now replay in Normal Difficulty.
For now I can shurely said - on Normal, enemy do more damage. In some levels more enemies. But they are dummy as on Arcade.
On Arcade - I died only several times by acidents - fallen from edge, or in last stand with Mangus, because this boss fight is too tough.
On Normal - I died alot of time in various situations. And in this mode you must check you gear before intering in next sections of level. Don't waste ammunition in milk!
Interesting - what I wiil see in other two difficulty modes?

About change it on fly - I don't checked yet. I going to check this when finished my current run.

P.S. Sorry for my english, I'm russian.

Well I have since played through the game, and it seems like changing the difficulty mid game does in fact work. I decided to start out on the hardest, and then work my way down to a setting that was a good fit. I ended up having to turn it down a notch at the beginning of the first snow level and it got noticeably easier. It seems like the enemies can take more damage and the player can tolerate less, the higher up on the difficulty scale you go.