I started a new game on tactical, saved, then switched to hardcore and saved again. After making copies of both save folders and swapping the data.000 files, I confirmed that was enough to change the difficulty level. Replacing sections of this file, I was able to narrow down where the difficulty level setting is stored.
I played the new game up to the arena in hard and tactical, then did the same with the hardcore save edited back to tactical (starting off with an extra 255 stat points to speed this up). The stats for Fergus, the ghosts near the arena and the spiders were the same in the original tactical game and the hardcore save edited back to tactical (which were a little lower than in the hardcore save). The DK's armour class (which depends on his character level and the difficulty setting) was also the same in the original and fixed tactical saves.
Playing in hardcore, the game does not add in the extra opponents until you are close enough that it has to start keeping track of them anyway (most likely the same range that shows up on your mini-map, though I did not check that). This means if you hex edit out of hardcore mode, you will not encounter extra opponents when you enter new areas.
To get out of hardcore difficulty, edit the data.000 file in a hex editor (see the hex editing topics above as reference), and search for the text string 'PlayerInfo'. Two rows below the 'I' is the difficulty level; change the 03 (hardcore) to 02 (tactical), 01 (action) or 00 (easy), and reload the save.
Check your messages (click 'My Stuff' in the top menu bar, then 'My Messages').
