Difficulty settings will affect everything except treasure hunt, so storyline, challenges, arena, and PvP all get affected. Warlord II should give a 50% boost to enemy stats - that is, they are 150% of normal. They will not show up as green “buffed” stats because they are considered inherent.
If you have any other questions, feel free to stop over at the QnA thread in community guides (QnA thread can be found here) 
We made that thread to be a place to ask questions like this that you can’t find an answer for!