Those who've completed the download already know two things: the Bioshock demo is absolutely incredible (the sound design took me by total surprise) and it's also very difficult. At least, when certain alarms go off and an endless stream of enemies start attacking...we don't want to ruin it for those who haven't played the game, but it's hard.
But for gamers looking for an even greater challenge, it's possible to activate the greyed out "hard mode" on the title screen.
Before starting the demo, go to your gamer profile in the dashboard and then change your default game settings. Go to general, then change your difficulty to hard.
Now when you start the demo, hard should be highlighted when you have the option to select your difficulty. Don't move the cursor or you will not be able to select hard again, unless you go back (B).
Easy as cake...until you load it. Then things get hard again we're assuming. Update: How to play hard mode in the bioshock demo [via xbox360fanboy]