I like the current difficulty settings and almost always play on elite for the bravery bonus. I enjoy being able to complete every quest once on elite and reach level cap.
What I don't enjoy is farming a quest for a chance to get the named item I am looking for. Killing a dragon should give a dragonscale, that is common sense and is what any PNP game would do. Having recently started permadeath and enjoying it immensely I propose the following.
Create a new difficulty setting for every quest: "Hardcore", make it as difficult or more difficult than elite, remove Resurrection shrines (or make them unusable) and include a consequence for releasing/death equivalent to losing a level as per PNP, no reentry of course (raise dead spell or equivalent should still work however as they are part of the game and an important part of the healer role). MOST IMPORTANTLY, the rewards need to match the risk, make named loot drops a GUARANTEE at end chest or end reward list or something equivalent i.e kill epic Velah on hardcore, get a guaranteed Flawless Red Dragon scale. The harsher the penalty for failure, the greater the reward should be.
This is clearly not for everyone, but for those of us that seek an intense gaming experience with a requirement for team work, this will give us that. And for those who would prefer to risk losing a level than repeat the same quest 10 times, this will give them that option too.
I am making this suggestion as a programmer and if the codebase is well designed, this should not require much programming, especially if you keep the same difficulty as elite and simply add the consequences and rewards. But if the codebase is as such that this would be a large endeavor, probably best to stick with bug fixes and new content.
Sincerely,
Tephaz (Khyber and Thelanis)
P.S. if you think this would give out too much named loot, consider making "Hardcore" non-repeatable and all loot found in it BTC. i.e quest is accomplished and threat is gone.