Yeah, it is definitely possible to fuck up multiple difficulties. There are plenty of games that do it. In fact a lot of people’s responses in here about giving monsters more health is one typical way they do that.
There are series like MGS which have multiple difficulties and I think are great because of that. There are series like Pokémon which I wish had more difficulties and there are others that have many difficulties but I wish they went with just one because they watered all the modes down. There is no one right way to do it.
I think it’s also fine to be a Souls game and cater to a niche audience.