Remember: you get MORE XP for easy mode and LESS XP for hard mode! Keeping this in mind, I play on easy for characters who don't do much combat damage, and hard for characters who do lots of damage in combat. ...Sometimes I switch the difficulty to easy right before I report completing a quest to get a bigger XP reward. Is that cheating?
Medium. A game should always play "as the designers intended" at its default difficulty setting. I never adjust difficulty in the middle of a game. (You can guess what I think of Oblivion.)
Even hard is too easy, though I actually challenge anyone to use the savegame editor to give themselves 1 hitpoint and finish the game.
I bet I could do it with a harm mage surrounded by a retinue of Sogg, Chukka, Gar, Loghain, etc. Hell maybe even solo with just harm + disintegrate + invisibility + lots and lots of greater fatigue potions.
Never played Arcanum on anything other than medium. The game's pretty broken as is, and the various difficulty modifers just make it even more messed up.