I have no clue as to why it was done, the Patch was only tested over the period of 2 weeks.
https://www.mmorpg.com/news/patch-174-hits-pts-2000073165
https://www.mmorpg.com/news/new-patch-to-deploy-wednesday-2000073267
I really wish we had the notes but they're probably lost to the wind. I only recently found 1.4.0's (1.4.0 was amazing imho) on a site that I do not know if is sketchy or not so I'll be abstaining from linking it.
I do wish I remembered more, it's just that it's been 11 years nearly and as you can guess, things get very foggy with memory.
I believe the spike in difficulty was a result of Patch 1.7.4.
I can't find the notes for it sadly but I do believe that the notes said that max mitigation on the player's part was set from 60% to 50% which was changed to 55? after 2.3? I don't know tbh.
Plus the AI getting their mitigation based on Veteran, Boss and Master with the standard for normal mobs being 25-33% or so alongside having power and precision being added them.
Normal mobs who did 5-10 damage on average did 12-25 after the patch from what I remember which is very little.
I just know that Commander Bergeron in Deadfall would die 1v1 versus my Telepath/Empathetic Melee CHOTA character back before the patch of course after 8? minutes and after the patch, he'd rip me a new one with how powerful he was made. Same with Corman, used to be able to 1v1 reasonable with First Aid with Staunch Wound 3/Patch 3 and use of disrupt/any other stuns at the time at level 15-18, but it was totally different once the patch hit.
I don't even think people realized how much this changed the game for the worse imho.