It is basically a higher difficulty mode, yes. In Legend Mode, the main (but not only) change is that Gym Leader battles will be like battle facilities in that you won't be able to use items in them and won't gain EXP. I've considered possibly extending this to all boss fights (as in rivals, Portal admins, etc.) too, but that'll have to be discussed once SPB can use the Internet again. It'll be a separate download from the main game, but you won't have to start over, since the game is still Spork, so it uses the same save file on your computer.
Legend Mode is probably a long way away, though. As mentioned, SPB currently doesn't have Internet access and I don't know when she'll be getting it back. Additionally, I want to give it some time after the release of episode 3 to do Legend Mode. This is in case ep 3 has any bugs that need fixing, since I'd like to only have to upload Legend Mode once for each episode.
Also, a note about episode 3 public release, since it's been a while since I've mentioned anything: Palletite has been busy with midterms, and so hasn't had much time to work on sprites. It may still take some time for them all to be done. They're definitely worth waiting for, though!