Do the mobs recognize that they aren't able to inflict damage and switch targets? Or at least some with an intelligence rating (rabid dog might not realize it's not really damaging its target, but other mobs should recognize and switch targets if the AI is decent at all, which it absolutely should be for a game like this.) That's really, really wrong and very disconcerting to me (indicating to me the game might be weak-sauce/lame a bit.) What level difficulty are you?

There is a reason behind all those Shadows/Shades rage topics in the forums.

That can happens in any difficult, however, I only was able to do it once time with my cipher, so probably you need a lot of luck with the rolls. And with the dragons, probably you are going to die many times before discovering when is a good moment to use the cipher.

Not sure why is wrong, the cipher is able to manipulate the soul, and the creatures have souls. So, in the game setting there is a reason why is valid.
And that is why the max cap was necessary (in my opinion). Anyway, when that happens is time to spicy the rules for fighting, like avoiding resting until 2 or more PC are almost death (Though that is how I play anyway).

My only concern in the highest difficult is the fact that the enemy has infinite spells and you don't. So, you are forced to kill the casters first as they will never depleted their power. This probably is a general issue in all the other difficult settings.

p.d. The plate armor are good, until you find Rains and winds elemental, then you only see how they rust your character from inside.

I didn't try harder but from what I read its not MORE mobs, but rather stronger mobs instead of others that you would've encounter on normal.

There's a loading tip in the game that explains it.

Hard increases the number of mobs, only Path of the Damned affects the stats of the mobs.

uh... yes, last line is from the tip. So, Normal vs Pah of damned the difference is greater number of enemies with better stats than your team (What we were saying already), though would be strange if they didn't change the types of creatures as was common on the BG series (or that was for when your PC had higher level?).

^
'Hard' changes number and type of enemies in an encounter (not necessarily total number of mobs (groups)).
POTD takes all enemies from Easy,Normal+Hard and ups their stats.

I don't believe I was responding to you Belsirk.