The other difficulty level is for the overall game and probably cannot take affect until you reset the game.
Ways they make the game more difficult:
Increased number of bugs
Increased length of night time
Increased length of NPC speeches
Placing Collasium in the Endless Sea instead of the Lost Sea (which I still maintain is not lost at all!)
Not placing key quest items in the game
Placing Glowstones behind the doors you need to open with Glowstones.
A new NPC character follows you around trying to sell you the Brooklyn Bridge.
Wyv
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