I think an increased difficulty just means more hashes are (typically) required to create a block successfully. I don't think it should slow the actual hashing rate though... my guess would be that it's something on the client's host that is consuming extra cycles and depriving bitcoin of CPU time.

That is correct.

And this
could also be correct. All newer CPU'S start throttling down their speed if they recognize a high temperature. It's a safety feature.
So mabye that's your problem. Try reading you CPUs temperature sensor out (I recommend CoreTemp) and tell us what temperatures you have when the hashing slows down.

The desktop goes up to 61C CPU max.

You can check your other running processes too, and see if something else is registering a noticeable amout of CPU usage. Either Task Manager for Windows or top nmon for *nix should work just fine for the task. Any %CPU used that isn't attributed to bitcoin/bitcoind is going to slow your hashes, even if it's only taking 5% of a core's processing muscle away from bitcoin.