I'd love to add to this discussion
Well yes, it is true that people like "challenging" games. I would know because I am a person who does.
Yet, there is a fine line and a difference between "challenging" and "frustrating". It's why so many of the so called "Soulslike" Games completely fall flat on their face. It's a topic thats been talked about for years now and just having a discussion about what makes games "hard" and what makes them "challenging" would take a lot of hours.
A base explanation I can give is, for example: Call of Duty's "Veteran" difficulty is just making the enemies into bulletsponges with laser like precision and you yourself die in like 2 hits. It's hard for the sake of being hard. It's not fairly or even remotely balanced. "Ready or Not" on the other hand is also a game where you will die in a few hits, but the damage system for the player is balanced in a way that you get a bit more breathing room since you can get hit on different parts of the body. You will die in 2 or 3 good hits to the chest. but if those hits are spread out to different body parts you can take many more. Like 1 or 2 to the right leg, 1 or 2 to the left arm. 1 to the chest. And other variations. It's perfectly balanced and thus challenging.
The idea of looping before being sent into the "other-world train" as a failsafe was really good. That's definitely something you can roll back. It sends the player a message without screaming into their face what they need to do. It's, dare I say, challenging.
Stumbling through the other-world train because you picked up a limb without the torso even being spawned cost me about an hour of my life since I couldn't figure out if it was a bug that I couldn't equip my gun with the flashlight anymore or if it was intended. Again that could also be fixed with a simple inventory system and the TV not despawning when entering the "Dark Train". At least I couldn't find one on the "Other World Train".
(I don't know how hard it is to implement an inventory system. Have only ever been a normal player without any game development background except for like... crappy lunar magic SMW Rom Hacks back in 2010 or so lol)