I play only on hardest difficulty... the only game in last 10 years that i was unable to finnish without trouble on 1st playthrough was The Witcher...
The difference between challenging and frustrating is mostly the AI... (let's take FPS as an example) if the hardest difficulty is made the way, that your opponenst instakill you with headshot before you notice him, it's failed frustrating AI... If the hardest difficulty is made the way like it was in Doom 3, it's challenging... Yes i know that Doom 3 was for most people sucky game, because they had to use flashlight - lol at them - but the AI of monsters was one of the best i've ever seen in a game, and i realy hope, they will use the same or enhanced for Rage...