Increasing difficulty simply for the sake of making the game more challenging doesn't actually appeal to me, but it's cool if you guys like it. I love the fact this is something we can adjust, unlike other games that force you into one single difficulty setting, for better or worse.
At first, I played Elite a lot. Eventually, I also started PvPing, and it tought me a lot, and one sad fact about the NPCs - they are just hit point bags. They don't use tactics and barely a power, and those they use, they also use ineffective often. (LIke the Mogai using Evasive Maneuers so its aft turrets can fire rapidly harmless disruptor bolts, instead of using its front weapons). And so, the only reason to PvE for me now are some items (Deuterium Fuel) or Emblems, or to enjoy a new story. And I stopped bothering with Elite normally. I still occasionally try it, just to see if it's as weak as I remember.
Cryptic needs to rework Advanced and Elite difficulty NPCs to use more Bridge Offiecer and Captain powers. This will make it more important to anticipate their behavior and counter their abilities, and it will also make crowd-control builds (read: Science vessels and Science Captains) more interesting to fly in PvE.
Yes, though on ground at low levels its really hard since you have so few powers. In space, and on ground at high levels, its pretty easy (though if you're playing a tactical, you need to focus on making your alpha strikes in space, retreating, making another strike, since escorts cannot heal themselves well enough).
Escorts with an engineer captain, with the proper consol and BO layout can take more punishment than you think. We're not talking cruiser style punishment, but nothing will stay alive long enough to require that type of durability.