From Hellgatewiki.com

Hellgate: London is being designed as an infinitely-expandable world. Not only do the designers intend to continue adding monsters, weapons, areas, faction classes, and other online-only content, they also want to game to scale up as player skill increases. As such, rather than just making three set difficulty levels, the designers are making every area highly scalable. Monsters will increase in number and strength depending on how many characters are in the game and what level those characters are; even the levels themselves will scale up, and many areas will spawn at a larger size for larger parties.

"We do intend for there to be a lot of cooperative online play, so these areas need to be able to dynamically scale in difficulty to accommodate differing numbers of players. ...Fortunately, the self-balancing nature of a dynamically generated game makes this all very possible."
--Bill Roper, July 2005, Total Video Games Preview

There will be higher difficult levels as well, with pre-set bonuses to monsters and penalties to characters. It's assumed that these will work as they did in Diablo II, and that each character will essentially replay the entire game on each difficulty level; redoing all the same quests (and re-earning the useful rewards) from NPCs who act as though they've never met you before. This has not been confirmed, though. Ivan Sulic answered some questions about it in mid-2006, though.

Will there be different difficulty levels?
"This is not yet decided. The game will get harder, and be replayable at higher difficulty, but it's not going to be set to three specific "normal/nightmare/hell" difficulty levels, as Diablo and Diablo II were."
--Ivan Sulic

As is always the case, things changed during development, and by early 2006 Ivan was singing a different tune.

"There will be different difficulties. We're still looking at exactly what will change between the settings, but obviously enemies will be tougher and you'll be weaker. I wouldn't expect to fight a great deal more enemies at one time, but to rather fight enemies that are significantly stronger than they were on other settings."
--Ivan Sulic, March 2006

It will likely be a pre-set difficulty level though. With automatic scaling of course, but players won't get to design their own game, at least not without modding.

Will there be a customizable difficulty level, with player-set monster density, speed, etc?

"I do believe that is / was being considered. Though I'm not privy to the details, I wouldn't expect such customization to make it into the final game. Seems like that might adversely effect balancing in too many unpredictable ways."
--Ivan Sulic

Neither Diablo nor Diablo II ever got really hard, in terms of requiring players to party and play wisely to simply survive. Every level was doable solo and pretty easily, once you had the best tactics and equipment as your disposal. Will Hellgate: London up the ante? How hard will the highest dificult be? Impossibly hard?

"Nope. Our hard should be damned hard, but it won't be Data East Teenage Mutant Turtles on the NES impossible, nor will it rival the first Battletoads, which I am absolutely convinced Rare didn't even bother creating an ending for."
--Ivan Sulic

Community Day Report

Flux reported at some length on the general difficulty after his play experience with three characters in May 2007.

My first two play experiences on Hellgate: London came on game show builds, which are always easier than the build the Flagship guys are working on. This is not an accident; show builds are meant to be fun for complete noobs, who might walk up to play having never even heard of the game. Flagship doesn't want these people, many of them media, to spend five minutes dying and getting frustrated, so for game demos they upgrade the starting equipment and nerf the monsters' hit points and damage. This makes for fun, easy killing, but it makes it difficult to estimate what the game will actually play like.

The community day build was not a game show build. It wasn't nerfed and the starting equipment wasn't overpowered, and as a result it was a lot more fun, and a lot more challenging. I nearly died several times right out of the first station, and unlike my previous play time deaths, this time it wasn't just because I was talking to Bill Roper instead of watching what I was doing. In the community day build the monsters were quicker and more persistent, and if I hadn't known how to heal myself and use the controls pretty well, my first character, a Marksman, would have gone down several times to the small packs of Fellbores he got swarmed by in the early subway tunnels.

Since we were all set up in different small groups and our machines were not side by side, it was hard to see how other players were doing. I wouldn't be surprised if there were a fair number of deaths though, with most of the invitees getting their hands on Hellgate: London for the first time.

Overall, I got a better sense of the pacing and style of Hellgate: London. It's not a great comparison, but the game is much more Diablo than Diablo II, in terms of the pace of monsters and the approach you must take towards them. (Not in your movement speed or skills or anything else, though, since Hellgate: London is faster paced than either Diablo title, overall.) You can not rush into huge mobs and hack or blast your way through them in Hellgate: London, as most characters do in Diablo II. You will get swarmed and murdered if you try. A Guardian might pull it off with his "more enemies increase my shield strength" skills, but none of the other characters is designed to stand up to heavy abuse. The fact that there is almost no life leech in Hellgate: London compounds this, since a Blademaster or Marksman can deal very heavy damage, but they'll take a lot of damage at the same time, which will be fatal.

Death options.

Instead of running forward boldly, a wise player will advance with some caution, trying to bring individual monsters and small mobs into range, where he or she can deal with them quickly before moving on. Even in the early going, I found it necessary to proceed with some caution, and while playing a Summoner and Marksman I had to always remain ready to retreat. I also played a Guardian and found her by far the most sturdy and powerful of the three characters I had time to test. How true that holds later in the game is unknown.

On the whole, the gameplay movies and game reports from gaming shows have painted a highly inaccurate picture of the general pace and difficulty of Hellgate: London, and anyone who thinks they'll just make a Blademaster and then go gaily Whirlwinding through the hordes, the way the Templars do in gameplay movies, had better get used to seeing this particular bit of game interface.
--Flux, Mega Community Day Report, May 2007

Monster Control

Another aspect of game difficulty is how crafty or powerful the monsters are, and how much control over their movement the player enjoys.

"Diablo 2 has many ways to completely immobilise, slow to a crawl, scare off or render harmless large crowds of monsters, while Diablo 1 had only the single target Stone Curse. Is Hellgate London intended to be 'difficult' like D1, or 'light entertainment' like D2?"

"I have no idea. That's all in Dave and Erich's head and even then, they could be liars. I suspect you and I will only be able to find out after completing the entire game in its final form."
--Ivan Sulic, 2006

As of May 2007 there were a lot of ways to control monster movement, and the skills and effects that did this were very important to the game strategy. Few of the characters have minions with the ability to "tank," and as a result it's very important to find other ways to slow or impede monster movement. Most characters have various skills that can stun or knock back monsters, and some skills are designed expressly for this purpose, though none are as powerful as Stone Curse was in Diablo. Slowing monsters won't be as easy as Holy Freeze or cold damage was in Diablo II, either. You'll have to work at it and position yourself carefully and use your support skills wisely, and this is intended as a major balancing aspect.

The Blademaster, Marksman, and Evoker are all capable of dealing more damage than the other class in their factions, but all three also lack tanking minions or other ways to easily slow or distract monsters (Summoners and Engineers have pets to tank and Guardians are very sturdy and designed to tank themselves.) so must be played with some regard for their "glass cannon" nature. It seems likely that the Blademaster, Evoker, and Marksman will all be much more effective when played in a party, so they can let other characters engage them monsters, thus freeing up their entire offensive arsenal from the second row.

Hardcore

Hardcore mode will be included in Hellgate: London, though it may be grouped with the other online-only features such as guild support and pvp arena play. It will work basically as it did in Diablo II; as a specially-created character who has just one life. If your character dies, from monsters or lag or pvp or anything else, they're gone. No resurrection, no second chances. Hardcore was on the drawing board from the beginning:

"Hardcore is a really great challenge for players, though, so it is at the top of our list."
--Bill Roper, September 2005 Fansite Interview.

It's since been confirmed as a definite game feature, though details remain scarce. More here.