I thought this could be a fun feature. If you just wanna relax and enjoy the game at your own pace then you could choose normal, and do the battles as usual with regular opponents. However if you wanted more of a challenge you could choose hard. Here the opponents would have more hp and pips and maybe even stronger spells. And if you dont like cheating bosses, then maybe there could be a easy option where the opponents had slightly lower health, and used no cheats Pretty much the same as the tiers in pagoda and winterbane, exept here we could choose our own difficulty without making it depending on level. And yes of course, higher difficulty would also give better drop rate.
that would be nice but worth it if the quality of drop reflected the level of difficulty you choose. an easy thought would be the first to enter the battle got to choose the number of monsters allowed to fight and regardless the number of wizards joining.