Dungeon difficulty settingFollow

As of late, I've been keeping myself in Razorfen Kraul farming for a few BoE blues that I can use on my other jobs that I've been leveling with a bit of luck here and there.

A couple nights ago before I entered I mistakenly clicked on my own portrait and saw that i could change the dungeon difficulty from normal to heroic.

I didn't try to change it, but I had a couple questions about it.

Can you change the difficulty yet? Or is it just reserved in the UI until expansion hits.

I also heard a rumor that rare drop rates were increased significantly and even new items were available only through heroic mode. Is this true?

At 55, I seem to easily be able to take out large groups of mobs inside the instance (29-32 elites), but on heroic difficulty, would I even be able to survive more than a couple?

from what i've seen and heard, dungeon difficulty is for TBC only instances, check on the BC FAQ on wow.com

AFAIK it is a BC only thing... you can only set it to "heroic" for the instances in outland. None of the current instances have "heroic" modes. There WILL be different loot though for the harder dungeons... I do believe that the harder settings are the only way to get the "tokens" for T4 which let you get different pieces. From the normal settings who knows what will drop... maybe no teir, but something still decent enough.