In comparison to FO1 or FO2, yes, ridiculously challenging. By level 12 or often far sooner, a good three-quarters of the wasteland was like shooting fish in a barrel. The combat shotgun and guns of similar equivalence were
more than enough to confidently walk in most areas with skimpy armor pretty confidently. Fallout 1, for instance, has you tackle an entire base of Raiders alone basically straight out the vault. Granted, you can easily find a non-violent approach, but if you so chose it was quite easy to drop the sentry and use his armor and a lowly side-arm of your choice to overrun the whole base.
It's somewhat more enjoyable, though. Can be somewhat shell shocking early on before you establish your economy well enough that replication's just a nuisance at best. It does the wonderful thing of making the lesser creatures (Geckos, Brahmin, Ants, Manti, Molerats, Dogs, etc.) worth the ammunition and, thus, a more valuable and welcome encounter. I've invested quite some time now and still I'm barely able to hang with some of the middle region crowd of enemies. Awareness is infinitely more helpful in direct result. Knowing exactly what's on an NPC is invaluable. Telling the difference between four enemies with 9mm Mausers and four with .223 pistols very well makes the difference between life or death.
The long-term investment's really to try to take them one-on-one. If you can handle one,
maybe you can handle two. If one pops a shot on you for double digits of damage and there's two others behind them, "don't be a hero." It makes you respect the system of encounters. "You encounter:" becomes one of the main attractions loading up a new encounter because in some cases if you fail to run fast enough you're toast. No save equals no reload, so it makes your decisions more profound in every aspect.
To summarize, I guess I'm really just saying that it keeps things from getting stale. Maybe a small nerf could be made to them, but I wouldn't mess with it too much. The difficulty adds to the realism as suggested above so if it were to be adjusted it'd have to be in very small doses. The only thing you could really do, though, would be to cut HP values. I really doubt there's a way to affect the NPCs weapons without messing with the players as well. Where they are now, it takes about me about 3 criticals to bring down an 150hp critter. In a few good turns, easy enough, but as many as 6-8 shots otherwise without missing. One on one with a superior weapon and near equal hp you
should win, but if your target has any friendlys in the area you'll be long gone before you can get off half that many shots. A shoot and run tactic with enough space can extend the amount of shots before you either have to run or take fire, but it's still a longshot from being a powerhouse hero-esque character usually blessed to the genre. Stand up to the normal baddie like a hero? Ha, enjoy having your tail kicked by the run of the mill. Strength in numbers, perhaps?
It's probably a lot less deadly with a couple friends backing you. Add two more PCs to the above comparisons and in every one the situation goes from potentially dire to, I presume, more of a cakewalk. I'm sure the majority of testing (and thus, reasoning for the increase) was in such situations with multiple people attempting to accomplish the same thing.