Unless I've got credible information on which setting would suit me, say from a short try-out at a friends place or similar, I always go for the hardest setting first.
My philosophy is that I'm far more likely to notice it being too hard, than I am of noticing it being too easy.
I also tend to like a bit of failing in games, as I feel it makes me think harder about what I'm doing, something which I figure might make me a better player, and could assist me in any eventual multiplayer.
And of course, it can lengthen a game considerably, which in this day and age doesn't seem to be such a bad thing, given how little time it can take to complete "modern" games.
I will say that too many games take the approach of giving you less health, and letting that be the only real change, though.
Best modern example I recall is Metro 2033 removing the entire HUD, which incidentally also made the game even more atmospheric than it already was.