Yes, the game is designed for VH/M. The unit stats are much more balanced than in Vanilla and anything harder than Medium for battles will make it VERY hard indeed to will, especially against superior troops. Similarly, Easy setting for battles kind of makes them ... well ... easy in an almost trivial way.

The campaign difficulty setting is more flexible - you might want to give Hard a try until you learn the ropes. On VH, expect to struggle, especially if you go for some of the more difficult factions.

Finally, the mod is also designed to be played on Large unit size setting.