There's a table of the difficulty settings here
As for DLC, I'd install it all. The Stone Prisoner, Warden's Keep and Return to Ostagar are integrated into the main campaign - you can play RtO and WK after you've finished the game but it doesn't make sense from a story persepctive. Awakening, Golems of Amgarrak and Witch Hunt let you continue using your character from the campaign. Darkspawn Chronicles and Leliana's Song are stand-alone adventures using pre-generated characters.