Yeah, I just went into the fourth (fifth?) dungeon and I almost went with the middle difficulty, but I just wasn’t sure if I should. Turns out I probably totally could have. That said, I don’t know if level values are a good measure of that or not, so there might not be a simple way to convey the difficulty without you just trying and learning.
What I was a little disappointed in was that the loot is better in a difficult dungeon, but not fundamentally higher level, from what I can tell. So it doesn’t seem that you can really grind, say, the first dungeon after a certain point, even with the difficulty slider. Am I wrong?