After finally managing to beat this insane battle after a number of attempts I was absolutely outraged over how pathetically stupid and/or suicidal the entire task force was in this mission. Under the best circumstances all the other transport and assault gunboats committed suicide to reduce the Calamari cruiser's shields to 20% and this mission only succeeded because I equipped my craft with heavy missiles. Other times the entire task force sacrificed itself for literally only 4% damage! What's worse is that I alone also destroyed ALL the enemy fighters as well in this mission!

Seriously?! What were those ***** doing?!

If the entire task force were under my command, this COULD be explained away as incompetence on my part. Instead I had only one other craft I could command while the remaining 12 were supposed to do their mission. Is 'impossibly stupid allied AI' some feature of the 'hard' setting or something? In X-Wing transports equipped with torpedoes fired them @ 6km, not stupidly close in to point blank range and get themselves destroyed!

Yes I targeted the mines first and then went directly for the enemy fighters when they emerged. I did my part of the mission perfectly. How was I supposed to direct the transports to fire their torpedoes at long range instead of engaging the cruiser @ point blank range?

Hard mode breaks the AI both in this and XWA (and at least once on normal in a mission towards the end), the game difficulty makes the enemi AI better and the friendly AI worse, same thing in XvT.

So Hard mode effectively breaks certain missions and that I shouldn't feel inferior playing on normal or even easy at times? I really like going beyond the minimum mission requirements and it's vastly easier doing that in X-Wing Alliance. However when your mission depends on friendly AI's doing their job properly, that just breaks the game. It's virtually impossible to engage a Light Calamari cruiser with even a fully-loaded Assault Gunboat, but that's not true about a Nebulan-B with a Y-Wing in X-Wing Special Edition.

Thanks for confirming what I'd only been suspicious of.

Hard mode is mostly there as an additional challenge. It's more moot in XvT because that one is made primarily with multiplayer in mind but by and large in Tie Fighter and X-wing Alliance you need to play on Normal for the intended experience.
XWA in particular becomes ridiculous on hard and is buggy on easy, TF while it still has some AI glitches here and there they can be worked around or are just random (and I'm not sure how many are due to fast modern CPUs or excessive DOSbox cycles messing with the AI) is fine on easy and normal for the most part apart from one of the very last missions with muurian transports attacking an asteroid base that needs to drop down to easy because of an AI bug on normal and hard.
On normal as long as you remember to also complete all secondary objectives (always check them with the G key) and some bonus objectives (these are secrets but it's ok if you miss some, many are usually just extensions of the secondary objectives anyway, sometimes it's just enough to stick around for the cleanup after the battle) you can easily max both military and secret order ranks before the end of the game even on easy (though you'll cut it closer than normal as you receive less points).
XWA and XvT also have different rules regarding destructable structures like lasers and deflector towers, hard difficulty in XWA doesn't allow to kill the deflector towers or any other ship component unless the shields are down which means that getting bonus points or just complete certain missions becomes much more difficult by default, in XvT the rule applies depending on the mission but it's usually normal and above that limits all or part of the component destructability (some missions limit it on easy too for some reason).
XWA easy difficulty is also occasionally buggy, it had to be patched at the time because of this and I myself remember having a harder time beating the game on easy then than a couple of years ago when I replayed the game on normal from top to bottom for the first time in a decade.

Also do keep in mind: these are old games, when they say "hard difficulty" it's usually literally hard not "a bit more challeging" like today, I wouldn't be suprised if the devs tested mostly easy and normal because they assumed that was the difficulty most players would use anyway.