I don't see here anything new about difficulty. This is just a new way to cut down grinding.
Some tactical JRPGs like old Shining Force games were kind of similar. You did have to back out of battle with the main character alive, but you got to keep XP gained.
Anyway, I do support the design philosophy that you gain something fro everything you do in a game, whether it's money or equivalent, XP for levels or skill tree advancement. It should be slow enough that you can't really replace actually playing well by too easy grinding. But still getting something when you have to try a thing again and again makes it less infuriating.
As for difficulty, I think I play 90% of games either on easiest or hardest (much more often the first). Though that's ignoring all my retro gaming without choice.
Almost only exceptions are strategy games, but then those might have up to 9 difficulties, plus various other elements to set.







