Borderlands is incredibly stupid, badly designed and awesome at the same time....
If you want the game to be impossible, you dont do ANY sidequests at all (starts getting impossible with bonehead)
If you want it to be hard, you do ONE sidequest. More than that, the game gets easy.
Problem is: they dont tell you that!
Anyways. The game becomes interesting and challenging only AFTER you beat the main storyline on playthrough 2 (and maybe you have to become lvl50, but I think it works if you beat it sooner, too). All the monsters become lvl49-51 and there are much harder subbosses and the bosses respawn. That's exactly the setting in which the game should be played, and if you want some content at that point, you better saved up all the sidequests.
edit: oh btw... afaik, the only way to adjust the difficulty of the game, other than restricting yourself to certain content, is to change the difficulty multiplier in the ini and THEN have clients connect to your game. Does anybody know of a utility to simulate borderland lan clients? Because running multiple instances of the game... thats a bit much for my computer
(The instructions on the internets tell you can kill those other clients after you launched the game - but thats wrong they need to be running)