The big problem is that frankly, Yooka-Laylee just plain isn't very challenging.
And that's a shame given how I'm one of the few who actually enjoyed spots like the Gloomy Gem Grotto (pre-nerf) or the Hivory Towers slide.
There just isn't much in the way of areas that actually demand you use your characters' skills with any kind of mastery or precision. Hazards are few and far between, enemies can mostly be skipped, and the game is generaly afraid to challenge the player. This is mixed with how utterly forgiving the game is (there is little incentive to not die as there are no limited lives and respawn mechanics are fairly lenient).
Then add how due to whining, the game's few difficult sections excluding its final boss got nerfed. Or how flight, even pre-buff, already completely broke every chance of anything other than the last boss offering a challenge. Or how the underwater bubble ability give you infinite air AND is spammable with no consequences (thus eventually making the air meter and swim mechanics essentially pointless).
Given all of that, I didn't expect much of 3-Butterfly Mode, frankly. It's the dumbest, easiest, laziest way to try to make the game harder. And it run into the same problem as many such modes in a lot of games: if the game is easy enough that you don't get hit anyway most of the time, then what's the point?
What's the actual effect of having to conserve health more carefully when recovery is plentiful and hazards that take it away are few and far between?
So I actually knew, coming into this mode, that it wouldn't magically fix the game's difficulty issues (since the issues are based on mechanics and lack of hazards, not on the game being stingy or generous with health).
And before the complaints of "lol go play Dark Souls" begin, I want to point out that Mario games (and in their main game, not merely the optional stuff) aren't afraid of throwing curve balls and hazards at you. Likewise, both Banjo-Kazooie and Banjo-Tooie weren't afraid of throwing more dangerous stages your way (while Rusty Bucket Bay is more infamous, Click Clock Woods is bursting with hazards and missing a jump is costly. In the second game, there's the complicated puzzles and hazards gallore of Grunty Industries).
As much as I like Yooka-Laylee, it is really among the easiest 3D platformers I ever played and frankly, I am baffled at players for whining about its difficulty.
Oh and an extra note...
The final boss isn't even that hard or unforgiving. If anything, my reaction to beating it was "Huh? That's it?". Compared to the Hag-1 from Tooie, YL's final boss really isn't that hard at all (The Hag-1 started nasty and got nastier as you damaged it. YL's final boss, by contrast, has only one or two phases that have a realistic chance of killing you. Most of the phases are actually pretty trivial and simplistic).
I think the real reason it's so jarring is because, not unlike pre-nerf Gloomy Gem Grotto, it's one of the few moments where the game actually dare to throw a serious obstacle at you. In the Banjo games, where difficulty steadily climb and later worlds are uniformally more dangerous, the final boss's difficulty feel natural and fitting. But because Yooka-Laylee is so easy, the final boss come off as jarring.
This does NOT mean the solution should be to nerf the boss! I really hope that won't come next. If anything, Yooka-Laylee really could use having more hazards around or adding sections that challenge you.