I did some further testing and it does appear to working as desired. There just wasn't much difference in the middle 6-8 difficulties. You can see the differences when you go further out, thanks!

Thanks for the reply,

Sorry, I may be missing something but that doesn't explain to me why there is no (or at least not noticeable) difference between very hard and very easy settings.

<t> I am playing Williamsburg Standard Scenario as CSA and it appears that the difficulty setting is not working as expected for combat results, at least. I have tried several different difficulties and with all I have seen that USA gets a significant Combat modifier attributed to Difficulty Setting ...