I played my first playthrough on normal difficulty and I did not find it frustrating at all, but I do enjoy bullet hell games so most of the bosses only took me a few attempts. I never felt compelled to take a break from the game or anything of the sort. I think it is a good level of challenging currently. The combat was fun and intuitive and as someone who doesn't really play twinstick shooters I think the control scheme is pretty good. (The skull was a good addition, too!) I played with a PS3 controller.
I will agree with modwhgmh that the attacking seems fairly unused outside of combat so far, but I am sure still you have plenty of ideas, although I think the setting does kind of play a role in the scarcity of conflict. I think the tutorial segment sets up a fair amount of tension by actually having bullet shooting hazards, which then ends up not really being a huge factor later on once you select your difficulty, as (almost?) nothing after that point actually appears to be hostile aside from the bosses. It still made me want to run to save spots every once in a while just to make sure I wasn't going to randomly bump into a boss in my first run, but by the time I got further into the game I realized that you were very generous with the save points prior to bosses. The bossfights themselves were really cool, and you've created some very pretty patterns. I did get some slight framedrops on the flower boss (aside from the Hourglass cutscene, of course) during the pattern that spawns petal-shaped crescents of bullets. Out of all of the bossfights - all of which I enjoyed - the one I liked the most was Orobas. The fight mechanics were super cool! It was actually really fun to keep retrying the fight since there were so many different questions (and some of the alternate answers were pretty entertaining.) I did think that the flower bossfight began quite abruptly after triggering it, I'm not exactly a huge fan of cinematic transitions and stuff like that, but it did strike me as being kind of rough for it to suddenly just spawn out of nothing. I think bosses could also do with changing or disabling the music after successfully killing them, since it seems a bit odd that the battle music carries on playing after the fight is over.
Regarding the movement, particularly the dashing, I was very struck by how smooth the whole thing plays and how good all your z-axis handling is, which became particularly apparent when I was trying to scale some of the side walls, like the one to the far right of the stalls, and some of the rock formations in the tutorial segment. The part that introduces shooting at switches for instance allows you to get raised up by standing on the spikes, which does actually let you get on the rock tiles next to them. It's really cool that stuff like that works and I hope you may even include an (optional) secret or two that rewards crafty climbing. As a side note, I never found myself needing to use the dash in actual bossfights.
I really enjoyed the story, setting and the themes. I remember commenting on the name you chose when you announced the title of the game and it wasn't really clear what the implications of it were, but now that I've seen played the demo and learned more about the world it makes a lot of sense. The NPCs are very endearing and are always a joy to encounter, especially with how expressive the portraits are, and you are clearly having waaaay too much fun with the hotel room numbers and other cute details like the trivia questions or the item descriptions. I think the relatively somber atmospheric music gets contrasted nicely with the humour in this game, so it still ends up setting a good tone. That being said, some segments of the game can feel a little bit barren of NPCs at times, but that does suit the theme and therefore seems okay for that part of the game, and the empty stalls did hint at there being possibly some kind of influx of NPCs in that area perhaps later on in the story? The NPC interactions really elevate things, so it's going to need a very careful balance, and I think the demo succeeded in that thus far. Sometimes I almost wish I could talk to NPCs again to ask them about new things I've encountered that are in some way related to them, but I do think that there's already a fair amount of that. I'm also very excited to see what other equipment ideas you have for your current equipment system.
PS: Since you suggested to me to try easy mode without the August Attire on yesterday, I tried it and no boss took me more than 2 or 3 tries tops with all of my clumsy maneuvering. Sarcoph Augustus does strike me as being kind of rough on easy still, and I had the impression that Orobas didn't feel too different from his normal mode counterpart.