First, my premise. The game is both too easy and too hard.
This is a concept I was introduced to in Star Trek Online, where the forums were blazing with "This game is so easy you can AFK and win" and "This game is ungodly hard and no one can play it" threads, with each type infested with the other kind of posters telling the Ops that they were stupid and had no idea what they were talking about. The Devs, in asking for more focused feedback, pointed out that in truth the game might be both--too hard and too easy. That, specifically, some builds/classes/equipment made the game in general very easy and others made it very hard. Also, of course, that some missions (read: Quests) were far harder than their level and others far easier.
I would say that DDO is in exactly this situation. For those with very strong builds and twink gear etc, the game is mostly considerably easier than it thinks it is. For those with newbie builds or paths and "first character" gear, the game is mostly considerably harder than it thinks it is. Those with foreknowledge of what they'll need in a quest also shave a considerable amount of difficulty off of quests.
That's ok, if the game can handle the discrepancy well. Currently, I don't think it does. Casual/Normal/Hard/Elite/Epic is not enough--some characters can't handle certain quests at-level even on Casual, while others can blitz them under-level on Elite. The difficulty range needs to expand.
I think the best way to do it is to throw open the doors entirely. This would be similar to "Epic" difficulty in that it would make every quest in the game a potential "Endgame" quest. It would also mean the Devs can mostly stop worrying about having to try to balance new quests to make them hard enough to challenge the Top end without making them impossibly hard for the Low end. Basically, for every quest, rather than C/N/H/E/E as difficulty settings that modify the level of the quest, simply allow the player to directly pick what level quest they want it to be. Want to run Enter the Kobold as a level 3 quest? Go for it. Want to run Misery's Peak as a level 26 quest? Gotcha covered. How about Reaver's Fate as a level 90 Raid?
Mobs and traps simply need to scale to the level of the quest, something I think they kind've do already. End rewards, again, are already supposed to scale to the level of the quest, and special End Rewards (or loot drops) can simply be turned off if the level of the quest is more than X (insert reasonable number here) levels below the minimum level of the gear or the original level of the quest. Scale XP as well. Similarly, Epic tokens/fragments and such can simply be flagged to only drop in quests of X level or higher.
Vets are often complaining about how the Devs are wasting all this time designing low level quests while the higher levels have almost no quests at all. Well, now there'd be no more high and low-level quests--simply a smorgasbord of choices. Play what you feel like playing, no matter what level your character is. And, as to the original point of this post, it also allows you to fine-tune the quest to the abilities of the group, allowing you to find the sweet point of being challenged without being overwhelmed--no matter how powerful or weak the group is. This also means that every single mechanical advantage can be potentially useful, as I'm sure screenshots of particularly high level quest completions would become another goal for guilds to test themselves with. High scores, so to speak.
Honestly, most of the framework (scalable enemies and traps) should already be there. If not, it would take a fair bit of work to put the framework into place, but from there it would be pretty easy. And I think the benefits would be enormous. I know that, personally, being able to play my favorite quests instead of being forced to play the ones in my level range, would dramatically increase my enjoyment of the game. This game has lots of fantasticly designed quests, let's show them off.