I've always been of the belief that on lower difficulties the boxes just have more consumables in it than on higher difficulties. The fact that I can waltz through elite while taking hits left and right, only to use 3 health capsules and have 4 more laying around sort of makes the difficulty... Not as difficult. I have around 1030 bound sparks of life to show for it.

On normal, boxes should have a lot of consumables in it. I mean, a lot. Like, 3/5 boxes should have a consumable in it. They could also have an additional chance at something else (Say, 20% chance to also have a few crowns or fire crystals), but the consumables should be thrown full force at the player.
On advanced lower it to 2/7 boxes, and on elite 1/9. This includes all consumables - health capsules, remedy capsules, recon flares, barriers, vials... All of them. You can also lower the monster drop chances of consumables per difficulty.
This makes elite mode more of a "rationing while dodging" difficulty. If you don't get hit, you'll still be doing well, but if you do get hit, try not to do it often. It makes advanced doable and not frustraiting, and normal is the "tutorial" sort of difficulty that tries to give you a lot of help.

Call it artificial difficulty if you want, but those times when you really really need a health capsule will be far more noticeable when there aren't 3 consumables every 6 tiles.

@Fangel

To some extent I agree with you- there should overall be less consumable drops on elite difficulty. Players should be rewarded for skill. I'm more concerned however, with the amount of grinding required of players that just aren't so good at the game. Like, lets say that Spiral Knights was the first game I played ever, and 'normal' difficulty was entirely the best fit for me.. but I'm going to get bored and leave if I play on normal mode. Not because it's too easy, but because I won't be able to find enough rarities and advance.

This poses the question- should players that are on a steeper learning curve be allowed to advance alongside ones that have a strangely enthusiastic learning curve? The answer that I've came up to is that we shouldn't be comparing these types of players or judging them by how skillful they are at the game, because enjoyment of the game is a key factor for everyone involved. The curve that I envision to facilitate this sort of philosophy is as follows-

Normal mode**: About 4% less drops than advanced mode; no special* drops; difficulty of current advanced
Advanced mode**: Same drop rates as current elite mode; special* drops akin to current item drops; bit harder than current elite
Elite mode***: About 4% more drops than advanced mode; special* drop guaranteed every 50 hours; difficulty = shadow lair

*special drops refers to the finding of an unusual and interesting item, like old prize boxes, equipment, or other oddities
\- Some of these things, like old prize boxes, would be extremely rare and limited based on how many were sold etcetera.
**Advanced mode would no longer give defense a lower boundary like in lockdown, but normal would retain this proprety.
***To accomplish this, "real difficulty" via crazy things like 15 phantoms should be used on a level by level basis.
Other- difficulty should also effect the spawn rate of danger rooms + number of consumables + length of levels

The idea being that overall, farming on normal mode would be about as fast or even slightly faster than farming on elite mode if you were going at the equivalent rates, but that farming on elite mode would give you extras that "hardcore" players would value significantly. I noticed that myself and many other end game players ALWAYS go for boxes on elite mode, even if those boxes aren't likely to pay out with much.. the reason being that we all secretly want to say that we paid 3 energy and BAM! DARKFANG! THIRD TROIKA! Finding such a thing is kind of beautiful.

Another part of this design was the idea that right now, no one plays on advanced mode.. if elite mode were this sort of crazy hard niche thing, it would keep the majority of players that are good at games but not practiced in the art of Spiral Knights in advanced mode and the ones that are godly in elite mode, while maintaining normal mode as a plausible option rather than a grindfest.

I'm curious to know what you think of all this. Would you say that it captures the problems related to difficulty?

We should never throw shadow lair-tier difficulty at people unless they're worthy of it. Having the hardest difficulty jump from "casual" play to "use 3+ sparks to get to the elevator every level" is not very fun. The point is, harder difficulties need to make poor performance more painful than lower difficulties. In order to reward those players further, add fun challenges into the higher difficulties.

I posted this in another thread. It covers a few ideas about the idea of difficulties, but here are a few key things from that:
Making the overall game "harder" isn't the solution we really want. We want a challenge, but if something is consistently too challenging (Grinchlin Assault, Tortodrones. When those come around complaints are high) then it stops being fun.

I'm going to take a look over to the game The Binding of Isaac: Rebirth. It is a rougelike dungeon crawler. There is an unlockable character called "The Lost" in this game, and its thing that makes it different is that it can fly at the start of the game and can take health-reducing items for free.
The catch?
They cannot gain health by any means. If you get hit once, your entire run is over.

Many players cannot beat the game as The Lost, or ever want to play as the character after getting all the unlocks as them. Why? Because the challenge the character presents is too hard. Personally, I like the character, but I understand why others do not.

Here is my other key point from that other thread: We don't need [a harder/easier] "elite" mode. We need a more "varied" elite mode.
Making "elite" something more than more of everything would make it unique. Have spontaneous challenges, but don't make the entire thing impossible.

What could be done to compensate would be to make advanced and elite mode give the same amount of rarity drops, but elite still drops more heat/crowns. I'm sure players would go back to advanced if that were the case, unless they're seeking extra challenge.

Last point from the other thread that I want to make clear is: advanced mode is how the game used to be played. Using elite as a "base" is not a good way to go.
So, like, stawp with all the elite mode being used as the base.