TBH there was no concept of "difficulty" back then. From the start we accepted games are developed in the way you cannot finish it. So we had no "finishing a game" mentality. So many arcade games we grew up with before console games was in the way you just play it until you die.
So, the concept of "progression" probably invented in NES-era but I honestly still had arcade mentality. For example playing Super Mario on NES, I went to the castle and princess wasn't there so I unlocked the next castle and princess wasn't there again I was like "princess is a lie" and never played a Super Mario until this day lol. The game was playable but it was so easy to not die I didn't see any point in playing the game because we already got used to dying. We were already master of surviving.
So in this game the idea of video game started as "survival game". The longer you survive and do stuff to raise your highscore the more it matters.
For example I have no idea why video game consoles had highscore stuff because who can see it other than me? Arcade places had highschool thing so we can flex and some guy from another town challenge us to beat our score. There were bets about it and special events for it. So back then video gaming wasn't limited to playing a game, it was mostly about what society did about video game and all the friendship we had along the way lol.
But then survival sense continued in many NES games but then it was more like "boring games" especially developed in the way you cannot finish it because if you had finished it it would take 20 minutes to finish it. There are so many boring NES games and they had no arcade sense of survival. In arcade games when you die it's your fault and because of it you wanna play it, but when it's not your fault you don't wanna play it. NES games had no idea how to make you die because it's your fault lol. For example:
This is not difficulty, this is BS. Just because of one pixel or two you die. If arcade games were that BS they wouldn't be hit and video gaming would die there lol.
And then I think around Sega Genesis-era I learned the concept of "difficulty" because games could have "easy" modes. Until then I didn't think games are "easy" or "hard". It was either "you died" because you gotta get used to the game or "you don't die" because you learned the ropes. So seeing dfficulty options in games activated a neuron or something in my brain. When game was badly designed in a way it's game's fault that you die because of BS ways I made the game easy, if it's still my fault because I die even in hardest difficulty I enjoyed playing in insane hard way.
So this difference is important but what's important is if a game worth mastering because it gotta be cool and fun to even play that game.
Then we started to come up with the concept of speedrunning, but in our mind it was mostly about "perfect gameplay" so not necessarily finishing it as fast as we can. We would play the game so many times we could finish them without losing health or something. However speedrunning was natural result of being able to play the game so perfectly. When you play the game perfectly it gets "easy" to you but if the game is hard it would be still hard because lots of games required complex thinking as in multiple things at once and jedi reflexes to survive.
In that regard when it comes to difficulty it's important that game always have an obvious way to make you survive and if you cannot survive it shouldn't be because game is BS. No one wanna play a game that's BS so if a game is that BS that this game is not "hard" and ain't gonna waste my life to beat this game lol:
What's actually enjoyable is being able to beat last boss of Metal Gear Rising in hardest difficulty without taking damage so you get S ranking. This is fun, not the bloody Silver Surfer lol:
Bahawahaha ha, come at me bro!!! *Jack the Ripper mode activated* lolol