Difficulty

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Can you change your difficulty mid game?

Also, do you get better items/more experience if it is harder?

 

You need to save, exit, alter game settings and reload, in any case. So not really 'mid-game'.
If you open a savegame in Heart of Fury mode, enemies will be ten levels stronger. But be warned, that any Heart of Fury saved game, will stay HoF. that's regardless of whether you change the settings back...
But the other difficulty settings? It makes no difference whether you play in Insane or Beginner difficulty, items and XP remain the same.

 

For changing the difficulty in mid game just move the difficulty slider in the options --> gameplay menu.
You don't get more XP or better items this way (except maybe some combat XP from extra monsters), if you would get more XP at higher difficulty your party would become stronger by levelling faster making the game easier on the long run.

HoF mode is an exception, but I don't recommend playing it before you've finished the game normally.

 

Oh, and I forgot to mention that Heart of Fury mode enhances many items too. But like kmonster said, it's better to finish normal mode, then import your characters into a new HoF mode game.

 

Also, although it isn't documented, on top of monsters doing more damage they also have increased BAB, which generally ensures unbuffed AC will not mean much, even at early stages of the game.