If it's an action game or an RPG, I tend to play on Hard if there are three options, or the one below hardest if there are more. I rarely replay games at a higher difficulty or anything like that. I like extending the initial experience too, and I enjoy the challenge, plain and simple. I'm like you in that if there's a simulated ruleset, like D&D, I will play at the difficulty that best matches the ruleset.
I do a little bit of research on difficulty settings, generally, to see if they influence the game mechanics in interesting or unexpected ways - like the language thing in Crysis. For example, I know that I'll be playing Mass Effect 2 on Hardcore at the very least, because the shooting is fairly easy - even though I'll be using an Adept and there are some questionable balance choices on the biotic abilities at that difficulty. I played Dragon Age on hard because it allowed full-force friendly fire.
Exceptions: I never play Call of Duty games on anything higher than hardened. Veteran is a nightmare. Crackdown is also hard as a motherfucker even on "Ruthless", which I believe is the middle difficulty.
I tend to be weaker at strategy games and the like; I'll generally play these at normal difficulty.


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