The difficulty of a server is a complicated balancing act. On one hand, you must respect the needs of the player, who wants to feel the rush of success, gather loot and xp, and a sense of accomplishment. On the other hand, you must balance the needs of the server to create a challenging environment, a balanced economy, and a sense of danger/the unexpected.
Why? Well, a few key reasons..
First, there's a saying, "People don't respect that for which they do not pay." Essentially, people will appreciate more the things they had to work for than the things that were given to them for free. That is the driving thought behind Arenthyor. For example, magic is rare, especially at low levels. When you get your first magic weapon, you will remember it and savor it. It may only be a +1 sword, but it will have significant value because of all that you had go through before getting it. The difficulty of the server will actually make you value your accomplishments more.
Second, Arenthyor is intended to be group-action based rather than a solo adventure server with the encounters built to challenge a 4-party group. As a result, the experience system rewards party-based groups with bonus xp (though groups over 4 do not get xp). Quests are also built for parties and are probably not completable with 2 or fewer PCs. Why is a 4-party group recommended? Because with only 4 members, PCs must give serious thought to the composition of the party. Typical parties including a couple of fighter-types and a cleric are then required to make a hard choice - take a rogue to handle traps...or maybe a wizard to provide added firepower...or something else. You can't have it all. Thus, the process of finding party members, forming a party, and figuring out the best configuration of your party becomes part of the fun.
Next, there is a maximum number of levels that you can gain in Arenthyor (40). If you logged on and were instantly leveled to 20th, all the in-game encounters would have to be of 20th level as well to be challenging. That challenge is the same relative difficulty as if you are 2nd level in a 2nd level encounter. The difference is that at 20th level, you only have 20 more levels to reach your max 40th level as opposed to at 2nd level, you have 38 more potential levels of enjoyment. Therefore, a higher difficulty level actually lengthens the opportunity for development of your character.
Lastly, pure economics. One of the key pieces that determines the difficulty of a an encounter for a player is the type of equipment and armor used. Better armor and items means a more powerful character. A more powerful character needs more powerful monsters to provide a challenge. More powerful items are also more valuable, which means that a character has access to more gold with which to buy things. Having more gold means that merchant items need to cost more to balance the economy. Therefore, harder encounters with lower magic loot actually keep the economy from experiencing drastic inflation. That's not to say that Arenthyor does not have magic. It does, but it is rare (especially at lower levels), and thus, exceedingly valuable and less likely to be converted into gold.
Hopefully this gives you a good understanding of why the difficulty of the server is such. I believe you'll ultimately have a more enjoyable time because your success will be hard-fought and well-deserved, you will establish friendships formed from common adventures, your character development and roleplay will have ample time to influence the world around you, and the gold you earn on your adventures will actually be worth something.
Rise to the challenge!