Oh, absolutely. There COULD be harder difficulty settings, and sometimes there are... But what's the point? It's a fixed price, there's nothing to encourage home-based developers to go above and beyond. With arcade games, once you've sunk that 10 dollars into it, it's got you. Can you let it beat you now that you've already sunk ten bucks into it??!! Pffft! Yet if you buy a game for you home console, play if for 10 hours, get stuck, give up, or beat it completely, the devs still get their cash, and the gamer gets the 'comfort' of knowing that if they ever want to play that game ever again, they can do so at no (more) cost to themselves!
Unfortunately, the entire appeal for home-based games is getting the progression of an arcade game in the comfort of one's the home. You're right, however - if a console game is too hard, it can result in the console game not being played again. Which can result in reduced sales for the developers. It goes the same way in reverse if it's too easy. There's nothing tangible as far as profit in the console market. There's units sold. That's it. In an arcade a large part of the profit margin is based on difficulty. But when you put them side by side, laziness and a dream of challenge seems more appealing than the initiative required for an honest challenge combined with the question mark of not knowing how much you'll be spending (despite the fact that it's probably going to be WELL less than for a console game).
But I think this is all a result of how swollen the home market has become. It never used to be this way, it's been a slow progression. Now there are so many choices that no matter WHAT the devs do, games will sell. People will bitch, sure, but what other choice do they have?