Previously, I had beaten them at a much earlier stage without too much trouble. I`m playing the D & D level, but surely it shouldn`t make that much difference?[/QUOTE]
Firkraag and Kangaxx were never meant to be easy, at least not for the average player. I used to visit the largest BG2 message board in the world before it went offline, and it took at least a month after BG2 first came out before "master players" were bragging about how "easy" it was to beat Firkraag and Kangaxx. They had to learn the right tactics and exploits just like the rest of us before it became "easy". My guess is that the game designers made fighting Firkraag and the rest of the dragons optional because they figured most players wouldn't be able to defeat dragons on their first run through the game. I know it was hard for me. Even the NPCs express reservations. I had to reload about ten times the first time I fought the Shadow Dragon, and I didn't even meet Firkraag or Kangaxx the first time I played the game because I wasn't using a walkthrough or spoilers and I didn't even know they existed. I think that Kangaxx was intended to be practically impossible to beat. "Kangaxx" is a name that should strike fear in the heart of any D&D player, and the Ring of Gaxx is supposed to be a fabled prize that is practically impossible to attain. Surely the game designers never intended any player to get two. I finally found a way to make beating Kangaxx almost trivial, which is not to say it isn't dangerous. (Improved Mace of Disruption +2 and Berserker Rage or Scroll of Protection from Magic.) But my technique requires you to finish the Temple quests and start working for one of the rival guilds, so I'm not going to brag that it can be performed by a 9th level character.
The biggest difference between the Core Rules setting and the Normal or Easy setting is that your characters are weaker (unless you cheat), since they won't have full hit points and they might fail to memorize a few spells. At the two highest settings, the monsters hit harder, and that makes a difference.
Usually, if a person plays the game several times, the game seems a lot easier just because his playing skills have increased. I know mine did. So in order to keep the game challenging, it's a good idea to raise the difficulty level or install mods that spice up the game. I'm not sure why the game was harder for you than you thought it would be, but think of it as a way to get more experience as a player and learn better tactics.