Tobold has posted a bit of satire titled Rise of the Leet King, in which he points out that many of the things that were supposedly harder about pre-WoW MMORPG's were merely more time consuming. I made a similar argument with 100% less Fake Jeff Kaplan last year. What is so hard about difficulty in MMORPG's?
Character Progression and Relative Difficulty
In a somewhat related discussion, Evizaer blasts the "theme park MMO" for its treadmill mechanics "because the in-game rewards are only useful on the journey". Effectively, character progression is a lie, because the relative power of the player compared to the appropriate level enemy (which is generally what the "theme park" MMO will have you fighting) stays approximately the same no matter how much work the player invests. More generally, though, this game mechanic critique is true in just about every game with character progression, be it levels, skills, gear, or whatever.
If you look at Super Mario Brothers, Mario basically does not have any character progression. Mario gets all of his abilities at the beginning, but levels get progressively harder. In the absence of character advancement, the player must improve in skill (or brute force memorization of where the foe that killed them last time came from) to continue to succeed.
By contrast, the entire point of levels in RPG's is for players (and developers making the content) to remain at approximately the same power level relative to the advancing content. Though the relative difficulty of the content does sometimes increase (more commonly in single player RPG's than MMORPG's), it is understood that a level 20 foe can be beaten by a level 20 character (or group thereof), and a level 55 foe can be beaten by a level 55 player.
Why Doesn't Mario Scale To The MMORPG?
One reason why MMORPG's don't increase in difficulty the way that Mario does is scalability. There is a theoretical limit to how difficult a level in Super Mario Brothers can get - once the entire screen, save for a single Mario-sized hole, is filled with enemies, it actually can't get any harder without becoming impossible. Long before that point, however, all but the most dedicated of gamers will have given up on the game. Fortunately for Nintendo, Mario games have a finite number of levels, so the game ends before it gets there. If you're looking to keep an MMORPG running for years, which you'll need to if you are sinking millions into development, that's not an option for you.
Perhaps the far larger issue, though, is that pesky "multi-player" aspect of the game. Some people are simply better at Super Mario Brothers than others. Nintendo's approach to this in the most recent game has simply been to throw all the players on the screen at once and give them the option of literally carrying their buddies to the finish line if they're so inclined. Though this is much more fun than the old model of taking alternating turns attempting each level solo, it has the effect of drastically reducing difficulty. With multiple players, the action continues as long as at least one player survives, with the others having the opportunity to jump back in (and keep the level rolling forward for the first player, should they subsequently die).
If you want to have multiple players without trivializing the difficulty, you have to design the content in a way that causes the entire group to fail if one player cannot make the cut. That's a big problem if you're going to start pushing the envelope in terms of things that actually increase the difficulty, rather than merely the time required to play the game effectively. Ironically, as Tobold notes, the only thing developers seem to have found that makes the game harder is to lean more and more heavily on player reflexes, with raid fights that require split-second response times. Pushing that side of the gameplay is bound to leave some players - and eventually most players, and all of the other players stuck in groups with those players - behind.
The business difficulty with game difficulty
Some players value the opportunity to progress more than their in-game comrades, and would gladly allow the game to reassign them to a new guild/raid team based on their current DPS/HPS/TPS numbers. These players are just as likely to declare victory and go home, taking their subscription dollars with them, when they decide that they've done what there is to do in the game. By contrast, players who have social ties in the game have far more of a reason to stick around, even after they have finished the game's content. As Evizaer uncharitably puts it, the "friends you make and the good times you share" are the thing that justifies the time spent on repetitive and occasionally shallow gameplay.
In short, increasing difficulty in a way that removes players from the friends that are keeping them in (and paying for) the game is the very last thing that a developer wants to do.