I got started on a second playthrough over New Years.  I jacked up the difficult to Challenging, and rather quickly noticed the difference.  I also started to notice the difference that faction makes.  This time, I started as King Lich of the Undead.  The Undead seem great at spamming basic units, but I spawned onto just about the worst possible place for them.  I was on a continent, alone, with a ton of Holy Grounds and the Fire Elementals that guard them.  Fire Elementals are immune to Death Magic, and highly resistant to melee and ranged.  I simply could not find a way to deal with them, and may well give up on the game.