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The only reason I can think of is that normally the Hard mode was supposed to be final difficulty, until Nightmare mode along with Legend skill-tree was added in free Enhanced Edition patch. Possibly they made Nightmare mode so difficult that they thought why not bring ammunition, materials, orange rarity weaponry and normal flashlight back. Honestly I prefer these being there, it's one reason I don't like Hard mode personally, otherwise Hard mode would be most balanced difficulty out of all for gameplay, except it may lack finite stamina.
Yes, they return selling ammunition, materials, as well as orange rarity weaponry on Nightmare mode. Flashlight no longer dims over time on Nightmare mode as well.
Changing difficulty doesn't affect story progression, neither character or quest progression in any way. If you are however going for Hard mode rewards, downgrading difficulty to Normal mode will break Hard mode difficulty outfit rewards. You don't have to do that, if you want to purchase ammunition and etc but you are on Hard mode, simply change difficulty into Nightmare mode and buy whatever you want, then return to Hard mode as this won't break rewards. You can do this from Main Menu > Play > Campaign > Save > Advanced.
Note that make sure you're not tracking Bozak Horde, Harran Prison or DLC based quarantine zone as quest, or difficulty options won't appear in Advanced settings.
Nothing, it's just outfits without any advantage. Generally outfits don't have any advantage. Depending on preferences some may look good on you while you're killing zombies.
Here are Hard mode outfit rewards:
1. https://vignette.wikia.nocookie.net/dyinglight/images/a/ab/Trick-or-Treater.png/revision/latest?cb=20180110212336
2. https://vignette.wikia.nocookie.net/dyinglight/images/6/68/Zombie_Wannabe.png/revision/latest?cb=20180110212621
Nightmare mode:
1. https://vignette.wikia.nocookie.net/dyinglight/images/8/82/Brainsss.png/revision/latest?cb=20180110212824
2. https://vignette.wikia.nocookie.net/dyinglight/images/0/01/D.O.A_Outfit.png/revision/latest?cb=20180110212854
If you like collecting then you can go for it, or if you like that particular skin. For example Trick-or-Treater glows in dark, similar to Volatile Hunter outfit which is orange.
To get difficulty rewards you must play entire through from 0% until 100% on that specific difficulty you're trying to get rewards from. Finishing on Hard mode unlocks both Normal and Hard mode rewards, finishing Nightmare mode unlocks Nighmare mode rewards along with all previous difficulty rewards. It can be broken by downgrading difficulty before reaching 100% story or joining someone who's playing at lower difficulty. Rewards can be regained by restarting story from 0% or starting NG+ on that specific difficulty you're trying to get rewards from.
All changes that are applied to Hard mode is transferred over Nightmare mode, except zombies do more damage and have more health. However certain mechanics come back as it was on Normal mode, such as vendor shops and flashlight. Also instead of 1/1,000 chance of finding Gold-tier weapons, there is now 1/100 on Nightmare mode.
Read all details here:
https://dyinglight.wikia.com/wiki/Hard_Mode
https://dyinglight.wikia.com/wiki/Nightmare_Mode
Nope, DROPs don't have night exp multiplier. However if you have Legend skill-tree unlocked from Survivor skill-tree, you'll get most experience on Nightmare mode from delivering DROPs.