Hey ! I don't know about the arcade version but in the PS2 port (it should be the same) there are 4 levels of difficulty : Easy; Normal, Hard, Very hard. There is also a damage setting (the amount of damage ennemy deals to you) with 4 settings : Easy, Normal, Hard, very hard.

I would get a hold of JK on twitter, I don't think he checks this https://twitter.com/Jaguar_Kings