It is important to understand these points when playing Divide et Impera, elsewhere you will probably become frustrated at first:

Concerning difficulty in general: difficulty will be really what's specified in the battle; i.e. if you play on Very Hard difficulty for battles expect a very hard to win fight (really difficult to win), if you play on Legendary expect to loose if you are not a perfect tactician and you don't do everything almost perfectly (just a single mistake will have you lose, and lose badly).

If you are an user that comes from Vanilla or either other mods you will have an huge impact from this and at first maybe you will not understand what's happening, so take this in consideration. The difficulties in DeI are just what the name in them implies. Even normal will not be a walk in the park and from Hard and above you will have a tough time winning the AI.

For some people this can be what they search, for others not and so if you pertain to this second category please play at normal difficulty or even easy (no shame on that) for the battle difficulty, so you will have more fun. There's not a match between you and others on using the highest difficulty you can, so use what's best for your situation and what you want to do. If you think you are having a too hard time in Hard or Very Hard simply decrease the difficulty to Normal. Hard and Very Hard in DeI are really hard and very hard, in the real sense of the words.

For what it concerns custom battles: in custom battles raw strength of units is the most important aspect and as such the best difficulty to use there it is normal. Anything above will mean that the AI will get bonuses (increasing by and by the more the difficulty) to stats etc. This in a campaign is balanced by stack composition (there are no limits on costs). unit experience, Generals, Agents and general campaign tactics, but in custom battles nothing of this applies (experience has a cost too). So, if you want to test strength of units in custom battles it is suggested to use normal difficulty because it is the most balanced for this scope.