Maybe this is just me, I dunno, but I really, really think this game is sporting some pretty excellent visuals. I remember how much pre-release harping it had, but I'm extremely pleased with the fairly sizable leap Bioware has made from Mass Effect to this in graphics. It's not flawless or anything, but everything is very solid and sturdy looking, great textures, not nearly as much inconsistency as they had with Mass in caking random NPCs with low res stuff, etc
Really digging the new engine, overall. I've heard they made a lot of improvements for Mass 2, but I'm not sure if they just meant for the 360 or for the PC as well, since the PC version was hugely better in correcting some of the UE3 faults.
For difficulty, Im starting with hard then going nightmare. I think if I did anything less I'd just be annoyed on my initial experience with the game as anything being too easy kinda bugs me, personally.