I've also found hard level to be unbalanced, more so in X-wing vs Tie Fighter and therefore don't use it in that game when playing or creating my own stuff.
XWA played much better at Hard level and I've done most of the campaign at that level bar a few missions that I've struggle on. To be honest I hate missions that see your wingmen die off quickly if it's not core to the mission's plotline. To me it's just lazy programming to rely on this method to make every mission challenging. I prefer to have wingmen around while still being able create a challenge for the player.
Missions have to be optimised by the designer for each difficulty level unless you choose to use just one set skill level all the time. The only control you have outside of this is by setting the AI skill per flight group and their loadout, flightgroup size and replacement waves. I'd guess the underlying parameters for each difficulty level are most likely stored in the game's .exe file.