Interesting...
Why not take it a step farther and change the difficulty settings all together. Make all quests base difficulty EXACTLY the same then differentiate them with Champions.
Casual ~0% Champions
Normal ~8% Champions
Hard ~35% Champions
Elite ~ 75% Champions
You could even adjust the % (+/- 1/3/5 per player in the group), to replace that AWESOME Dungeon Scaling everybody loves...
then change the XP to a Base + Bonus/per Champion Kill + Bonus/per player in group + Other Bonus (Ship/Pot/Voice Etc..)