I hate the idea of making survival a difficulty setting. Sure the point of survival is to make the game harder but it also makes the game easier in some ways.
Keep in mind survival is basicly a hardcoe RP mode while standard game play is more a free roam.
That said I suggest splitting difficulty and giving two settings.
one: difficulty (Standard health, ledgendary amount, how hard it is to find better stuff)
two: RP setting.
RP setting would have the following levels levels
1. game
info: current play stile no RP required
2. light RP
info: need food water, sleep, and ammo weight is a thing.
3. medium RP
info: light + illnesses and no fast travel.
4. survival
info: survival mode.
the RP settings would not effect enemy health and difficulty... though survival will make everything including the player die faster.