I play Very Easy, Medium, or Insane. There are no other difficulties. If I'm playing something for fun, then it's on Medium unless that proves unplayable in which case I drop it to Very Easy
Pretty much this. By default, I play and FRED on Insane. When playing a campaign where I don't want to have to worry about dying, such JAD (excluding the XA's Endless Gauntlet), or Transcend, I play on Medium. When I get frustrated enough over a mission, I tend to drop it straight down to Very Easy.
What playing style do you employ, what sort of enjoyment do you seek from the gameplay and basically, how the hell do you even play at Insane?
Insane forces you to adopt a more careful and nervous playstyle. For instance, on Medium or lower, flying a missile boat filled with Harpoons and Tornados is a rather effective tactic, a dual hit from the Harpoon will make short work of most Shivan or NTF fighters. On Insane, the AI is much better at dodging missiles at close to medium range, meaning that the Harpoon loses much of its effectiveness. Instead, you want to get as close as you can to hostile fighters, as you can more easily slip out of their view and prevent
them from spamming their missiles.
You also learn a couple of things, for instance that the tempest is the most effective and practical missile in the game due to it's high damage output against hull, shields and subsystems, big ammo reserve, as well as its fast rearm rate.
You also learn to manage your ETS more effectively. For instance, if you are carrying subachs early in the campaign, you can safely decrease you weapon energy to the bare minimum without any ill effects, giving more power to shields or engines. There's also the fact that you don't really need much power to shields when your shields are intact and you don't get hit, such as when you need to pancake wave of bomber while flying a thing that has eight guns. Basically the trick is to juggle with your energy distribution to suit you immediate needs.