Sounds really fun! I actually always wanted to play the Parasite Eve games but never actually got around to it, same thing with Ys games but I found them on GOG.com so I purchased 1-4 (beat 1 and 2 couple days ago).
As for the difficulty, I've got no problem with the game being hard. It's just that the ghoul/doll enemies feel like their HP is unnecessarily high (Part 1's end boss definitely had that problem), although I guess that would get solved once the player has leveled up their attack power.
Do keep in mind that there's a line between player skill and what the in-game character allows the player to do.
E.g. There's been a few times when I first got the machete that I could die, and when the game reloaded I'd have health missing that's not supposed to be missing, with enemy already behind me. Or that they sometimes spam their teleport a lot, which is something you can't predict when they do (I suggest a slight telegraph, but don't make it a red herring).
The gameplay, controls and mechanics for me personally are all a solid 10/10 although you should really look at changing enemy HP a little, story gets an 6.5/10 until I know more because so far it can be summarized as "Car broke down, entered what's essentially Silent Hill without fog, well dragon".
One thing I like is that you know as much of what's going on as the player, so there's no need for character narration telling the story since it can be done via gameplay and assisted by cut-scenes. That's really, really well done in my opinion.
To make the best with you game, you should play test extensively after adding, changing or removing every feature, mechanic or value (e.g. HP, Damage) to see how they feel when you actually play them. Since there's a really big difference between what developers want to happen and what actually does. So there's no amount you can play test that will ever be too much.
A really good way to play test is to get some friends or such and get them to play the game, then study their reactions and facial expressions.Since these players are essentially who you're marketing the game to, if a lot of them say something feels unfair or a section is too hard or easy then you should definitely look into it.
A game I played that made extensive use of that was Mark of the Ninja, if you play the Special Edition you'll find dev logs which you can read. A lot of the game's design, especially map design was guided by play testers. Not to mention that they saw players use mechanics and player abilities in way they never thought of, which can lead to further design ideas which improve the game.