It's a good bet multiple difficulties will exist for a number of reasons. I think the Witcher series offered enough levels in this regard. So something along similar lines is expected.
I will say after learning the game in W3 DM felt a bit too forgiving. Once you knew enemy attack patterns, how to gear and do character builds, how to prepare for encounters (90% of the battle most of the time, which fit thematically) and how to exploit the type of enemy (bombs, oils, potions, signs) it lost a lot of the challenge. The worst offender was Quen
. It wasn't the end of the world but worth noting.
I tend to prefer when difficulty increases raise the lethality toward the player instead of slapping more health or DR on the enemy. Bullet sponge enemies feel too artificial. Plus, it raises the suspense factor when the player character becomes more... fragile. If enemies are going to become harder to take down it should be for a reason. As an example, the enemy has stronger protective equipment. It goes without saying this advanced gear should fit contextually within the encounter (no super soldiers where they wouldn't be).
Other options would be different, stronger enemies in place of weaker types, more enemies (as long as it doesn't go overboard) and more accurate/precise enemies as difficulty goes up. Again, provided it fits within the encounter.
I'd rather not see advanced AI with higher difficulty for the reasons provided by sv. It implies less functional AI at lower difficulty. There are better ways to add challenge. Ways where the AI isn't marginalized on lower difficulty. The AI should be as intelligent as it can be at every difficulty.
Realism and ironman options would be fine. Ideally those would be independent options IMO.
I like the idea Kofe mention as well. Independent difficulty adjustments to different areas of the game = more granularity = more better. Likewise, reducing the strength of the character via slower progression, gearing ability, and success with any type of ability check sounds good. It's a good alternative to making the environment/encounters arbitrarily more powerful.