Is it better to change game speed to very fast?
I started out playing on very fast for the challenge, and I haven't had many difficulties throughout my 3 or 4 month career. With most monsters it doesn't seem to make much of a difference, but I have noticed that casters really like to "machine gun" their spells.
Sometimes this can be quite devastating, but other times it can be quite amusing, especially with liches and other monsters that use area of effect attacks (watching them charge up to you and explode can be quite amusing =D).
Really, since everyone says it doesn't affect difficulty all that much, my recommendation would be to crank up the reaction speed for the slightly increased skill advancement speed, especially if you have experience with Morrowind, and to a lesser extent, Oblivion. The decreased reaction time will mostly help those who don't have much experience with RPGs, since they may not understand the basic structure of gameplay, and would need more time to figure out how to tackle what for them is an entirely new type of challenge/gameplay style.
Besides, what kind of video game/RPG junkie doesn't like a good challenge?!