When you say difficulty settings, I think of lowering enemy effectiveness, raising player effectiveness, and removing consequences for bad play (eg: permadeath of characters). Is that what you mean?
Can be, doesn't have to be.
Can be things like making it such that you can fast travel instead of travelling slowly back. Can be that you skip a minigame you just don't think adds anything to the game. Can be that you do or don't want certain queues etc.
Can be a lot of things and the point is basically that there are a lot of things which can be toggleable settings which are extremely easy to implement, and greatly improve the experience for some players, while players who want "what the developers envisioned" or whatever, can play it that way just fine.
Others can make certain elements harder or easier or non existent based on their preferences.
You mention less annoying backtracking. Can you imagine a game where the “annoying back tracking” is fulfilling an important role (eg: resources attrition, encouraging revisiting areas)?
I can imagine some situations where it could be sure, but most of the times it isn't and the times it isn't isn't worth the effort for me. It just makes the game less fun for no conceivable benefit most of the time. The backtracking Im describing here is essentially filler (the type I don't think most people like).
If so, is there a threshold beyond which is too much? If there’s a slider that adjusts enemy damage, should it go to zero? If no, how do you decide the limits? What about the players who want to exceed them?
I think the idea here that you seem to be putting out is that there is some point at which a players choice to change the difficulty is no longer valid, and I don't think any such point exists. Let people do what they want, and give them some reasonable defaults that you've actually tested for/think blend well.
It seems like you have the assumption that everyone should be able to complete every game. Is that correct? Is that true for all media, or only video games?
I've seen someone ask this before and I think its an absurd question to ask. No one in their right mind buys any media to not finish it. No one walks into a movie hoping its so shit they walk out half way, or starts a novel hoping they're so bored they put it down.
Of course everyone should be able to complete every game. I can't even think of what point this could be leading to except the obvious absurd idea that people should be expecting not to be able to enjoy the things they purchase.