Difficulty Levels
I don't mean to offend anyone, but the difficulty level issue is one example of what I call “programmer game design”. Programmers are part mathematician and they like to do everything scalable. They think that everything is scalable, and that is usually not the case in games. In the case of weapon damage, you are just throwing everything off when you do this. Gamers like it best when they know that, for example, 3 hits from this gun kills that ship and 5 hits from this other gun kills that same ship. They memorize these kinds of things, and they want to be able to rely on that knowledge in their thinking/planning/tactics. This is one of the reasons that Faster Than Light was so popular, the players fully understand all of the math behind it and it doesn't change. “You need at least 2 shots to damage a ship with one shield box.” That's “gamer math”... 2-1=1. If a player can fully understand how the game works, it is more interesting too them, because it becomes more about their tactics and planning. Without this knowledge a player feels as though they “spray & pray... and hope” instead of feeling as though they had a plan and it worked. Gamers love it when a plan comes together;-)
Programmers like to use the complex “blackboard math” that they know, certain that their more advanced understanding of the numbers and how very clever this or that algorithm is will make for a “much better” game. How can it not? “Look how much more accurate to reality this math is, and how cool it works!” And this leads to the rationalization that if how the game works is a mystery to the player, it will feel more real too them. This last point can be true for certain types of games, but more often the player will think it is a much better game when they completely understand how everything works. The gamers don't have any idea how cool the algorithm works, all they know is that how the game actually functions is largely a mystery too them. They don't even see the “coolness” that is there, only the mathematicians can even see that. So back to the difficulty levels... when how the game works changes for reasons they don't understand and only half-perceive, they don't like that. “It obviously doesn't work the way I thought it did, now I don't understand how it works.”
I agree with other posters that you should not increase difficulty by changing how everything works. Mathematicians like to think it terms of math. It's “scalable” and they can mathematically prove it is the same thing! But from a gamers perspective it is not the same thing, “now only 2 shots from that weapon kills me instead of 3” is what the player actually perceives in the game. “It is a different weapon now.” Changing speed, turn rate, thrust, hp, or weapon damage changes what the ship is in this type of game, it makes it a different ship. I would increase difficulty, as others have already suggested, through more efficient/aggressive maneuver, better dodging incoming shots, and better aim for the AI ships and not change any fundamental properties of the ships themselves. With such simple ship designs, changing any fundamental property is essentially creating a new ship. This is also why I was saying long ago that “upgrades” too the ship itself should be avoided and any “upgrades” should instead be “additions” or “tangible, visible enhancements” like a single shot gun becoming multi-fire or installing a different/enhanced weapon or secondary ability. Because changing any primary attribute of the ship itself, with such simple arcade ship designs, is actually creating a different ship.
Now that I know about this, I am playing on "Basic Cyborg" so that I see where the ship balance actually is. Altering the primary properties of the ships themselves creates different ships, not more powerful versions of the ships that they were. It isn't really scalable in this way. Increasing all of the ship's attributes doesn't make it a “more difficult version of the same ship”, it transforms a destroyer into a light cruiser (for example).