Generally I start out at the default difficulty setting and increase or decrease it to a level I'm comfortable with if the game starts to get too easy or too difficult. Usually, I try to keep it at a level where I can face a degree of challenge but things don't get too unreasonable, with my previous character, I had it raised somewhat due to being at a high level and the default difficulty level just not offering any challenge at all. But since I started a new character, I've had it at the center, things can be difficult at times, but since I haven't left the area around Seyda-Neen yet, things haven't been more than I can handle, and I have to say I like that feeling of being in a large world where any wrong move could get you killed Morrowind offers in the early game.
As far as companions leveling, it really depends on how the modder designed it. Many companion mods have leveling in some form so your companions don't become too weak later on, but how this is set up depends on how the modder designed the mod. As to what difficulty you should use when playing with two companions, you'll have to try out different settings until you find what you're comfortable with, not everyone wants the same level of difficulty in the game, after all, not to mention that I don't know how powerful your character or the companions are.
As far as companions leveling, it really depends on how the modder designed it. Many companion mods have leveling in some form so your companions don't become too weak later on, but how this is set up depends on how the modder designed the mod. As to what difficulty you should use when playing with two companions, you'll have to try out different settings until you find what you're comfortable with, not everyone wants the same level of difficulty in the game, after all, not to mention that I don't know how powerful your character or the companions are.
Yeah, pretty much the same with me. On my Warrior in Morrowind, the game was extremely easy as I had full heavy armor, lots of HP, and swung around massive 2handers. I raised the difficulty a bit each level.
But on my Assassin, the game felt a lot harder. Relying on a short blade/bow and arrow makes things a bit more difficult, and wearing medium armor plus low amounts of HP, it was quite a different story. I had to lower the slider every once in a while if things got crazy.