You're not supposed to have any direct control over an already established world and the enemies that live in it, yet that one new button does.
you know, I kind of agree with your general sentiment that the world itself should dictate the difficulty of any given embark. this is a pleasing solution that hands the power to the players.
however, i believe the new difficulty settings are an accessibility thing. new players who are afraid to lose progress etc. that itself may go against the hardcore mythology of this game, but honestly, who cares?
luckily we can just ignore it, or turn it up to max...
you can no longer criticize DF in terms of an idealized simulation without acknowledging the development has shifted towards playability and gameification. At least in the temporary moment. That this shift will continue to dictate options / settings / "4th wall buttons" that might contradict historical understandings of what this game is
meant to be. so yeah, while I agree these settings sort of ruin the mood, and that in-universe explanations (the gods have gone crazy! the gods are asleep! the gods look fondly upon your settlement!) might be a good addition, in the end there will be more and more settings like this, so its best to either ignore them, or learn how to develop meta-narratives that override your soured impression of a holistic fantasy universe. aka roleplay