In the demo I don't recall if you can change the difficulty; I left it on normal, anyway. I started a new character in the full game on nightmare, and when checking for loot in Farglow, I found a very nice sword in the vase beside the warrior trainer's seat (I'm playing a ranger, but it would have been worth a lot). Unfortunately, when I entered the training area, I was in the same kind of relaxed, 'don't really need to pay attention' mindset that was good enough playing on normal difficulty. The first mage took a good chunk of hit points off when I miss-timed a jump, and I though I should probably save the game before continuing. But the mistake was mine, so I didn't bother. Fighting the next mage and warrior goblin I took a lot of damage (switching to unarmed melee isn't nearly as effective on nightmare), but would probably have been ok had I noticed the last warrior coming up behind me to join in the fight sooner. I had a couple seconds warning, but thought I could finish off the first warrior in time to get some distance from the second, but wasn't doing enough damage. I wasn't used to the fact that you can not jump to the side in DKS, so my getaway wasn't nearly as effective as I intended. Of course after I died and reloaded, there was no random loot to be had in Farglow from crates, etc.

Actually, in general I dislike not being able to jump to the side. I can see where it would be handy for people who want to dodge and roll around in combat, but while I tried that for awhile, usually a jump would be just as effective, if not more (probable much more, after you become a dragon knight). When exploring I've rolled a few times trying to jump onto things, since I wasn't lined up exactly in the direction I wanted to jump (maybe I'll get used to that).

I didn't bother using any exploits like jumping up onto the rocks in the training area (where the warriors can not reach you), but going through a few times to get enough gold to buy a new bow, I did reduce the difficulty to normal temporarily, then up to hard to try to get used to dodging and rolling, and then back to nightmare.

At the start of Broken Valley, more than a couple level 2 goblins were a challenge if they got to melee distance. I briefly considered lowering the difficulty to hard, and possibly learning Summon Ghost (though I was trying to save skill points for other things), but found it much easier to simply stop trying to jump backwards or dodge if there were too many opponents, and just run past them a few steps, turn, and fire.
In D2:ED on level 2 I tried kiting the level 4 chief to the far north west, near the necromancer's cave, but found it too difficult (though I hadn't assigned the stat points I got for leveling). In DKS, also level 2, I took the left branch of that path, and when I got around to the burnt church, was able to take on a couple level 2 warriors, a level 3 healer (who cast a lot more fireballs than healing spells) and a level 4 chief.

When pausing the game, moving the camera and casting Poison Arrow the character doesn't always turn to face the target, but that is not too big of a deal, and otherwise an effective strategy for larger groups or strong opponents for your level. For weak or moderate strength opponents you don't need to pause, and jumping back or dodging are usually good enough.

Anyway, I'm almost up to level 3, so need to head to the village and mindread everyone (went hunting first, and have not been there yet).