Dynamic difficulty?

[slashCo]

I tried going back to Darion but I'd already cleared pretty much all the monsters there, aside from a few tough ones I had to leave till later (Emenen or whatever his name is, the haunted castle, the wizard's tower, and some big knight stack in Greenwort). My question was, when you enter a new area, does the game look at your stats and army, and change the difficulty of the monsters in that area accordingly? That would explain why everything is "strong" to "overpowering" now, unless the game is just designed to be hard... I'm playing on Normal with a paladin, BTW.