I don't think it's necessary either to use a difficulty selection. Perhaps the first time you play through it, the difficulty is like any old Zelda game with minor threats progressing to hordes of monsters, the kind of progression you fight through in the Cave of Ordeals in TP. So maybe if they had the game file be a 2nd time play through, it could be increased hordes of monsters to up the difficulty without having difficulty levels? Like how when you played through Wind Waker the second time you could change clothes, I'm not sure.
I had this idea for my Zelda story line where you could play through the original quest, a long, exciting, and involved journey consisting of everything from peaceful villages to hordes and armies of monsters, etc. Then, upon beating the game you would actually be recognized as the hero, instead of always restarting at the level right before the boss fight. You would have also unlocked a new game play that is sort of like a mini-game in addition to the original quest. Then of course there would be the more difficult journey (the original quest, but with more enemies and so forth). But another addition to the game would be a reversal of roles, upon successfully completing every quest format, where the player would become the villain and play on the opposite side of the original journey. I had it in mind that the original journey would allow for solo or co-op play, as well as the increased difficulty quest, and the mini-game would allow up to 4 players, but I haven't figured out if the reversed course should allow for co-op or just be solo.