What plausible reason does GameFreak have for not adding in difficulty settings? I mean, they clearly toyed with the idea but implemented it terribly in Gen 5, why didn't they just put it in the options menu?

Even if you wanna rationalize it saying "It's a kid's game, wouldn't want kids to accidentally pick it", you could still hide it behind like, 3 "Are you very very sure" prompts and maybe a button combination or something so even the most acoustic kids won't be bothered by it.