I feel as though the degree in which challenge matters to me is highly dependent on the game's objective.
Devil May Cry 3's "Dante Must Die" difficulty feels like the game's true identity is revealed to the player. Because the player must play through the game in Normal, Hard, and Very Hard, "Dante Must Die" operates under the assumption that the player is ready for its challenges, and drastically alters the way the game is played by giving enemies access to Devil Trigger, which is not seen in other difficulty options. DMC3 has the player unlock Dante's (or Vergil's) full moveset over consecutive playthroughs at different difficulty settings, which additionally gives the impression that DMC3 was designed around offering players a difficult challenge to overcome.
This all being said, I don't believe that the difficulty of DMC3 is what makes the game good. Rather, the sum of its parts (atmosphere, gameplay, story, music, character design, and player expression, to name a few) is what makes DMC3 a good game in my eyes.
By contrast, I'll look at a game series like Pokemon. In the vast majority of games in the series (that I've played, at least) the in-game battles are a walk in the park. The difficulty is determined by player expression (i.e. the Pokemon the player uses), yet most mainline games can be beaten using only one Pokemon, such as the player's starter. The primary objective of Pokemon in the early generations was never to be difficult, but instead to create a game centered around collecting and trading creatures. It was only later on in which the series shifted its objectives to cater more towards a competitive audience, as shown via the QoL improvements directed towards online battling in Scarlet and Violet.
Is the difficulty the reason why people play Pokemon? For some who play challenge runs to forcefully limit their options, perhaps, but I believe that the vast majority still play the games to collect, battle, and trade with others using a team of monsters that they've hand-picked. The games have survived and thrived off of their interesting monster designs, addictive gameplay loop, generally well-done music, and the mass appeal of monster collecting.
While I no longer play the Pokemon franchise personally, I enjoyed the Pokemon series more than almost any other when I was a kid, so I can't say that easy games are automatically worse than hard games.
