No, sadly the update didn't fix the difficulty, but the developer is aware of the issue and is looking into it. I'm also not sure if all difficulty levels are affected.
I restarted the first episode on the hardest difficulty and the game became enjoyable again. On that difficulty enemies move faster, their attacks are deadlier and there are no health pickups in the levels. You can only regain health by killing certain enemies that drop it and by killing enemies with your chainsaw leg if you have the required upgrades installed.