@Jonte Each player's chance (if they're at Expert level) to receive an Expert-exclusive item is the number of players divided by the sum of max(2 / level, 1) across all players. In a Classic world (level 1), with both difficulty multipliers set to 2, your level would be 2, and the other player's level would be 1. Therefore, the chance would be:
2 / (max(2 / 2, 1) + max(2 / 1, 1))
= 2 / (max(1, 1) + (max(2, 1))
= 2 / (1 + 2)
= 2 / 3
= 0.67

Because of the max function, each player contributes at least 1 to the denominator, so the only way to get a 100% chance is if all players are at Expert level. (Again, you won't get much if Journey players fight your battles, even if you've set your difficulty crazy-high and are spending most of the fight dead. However, if the other players are close to Expert level, your chance will be close to 100%.)

Thanks for the clarification! What increases the chance and by what amount, how does the mod arrive at 67%? Would I need to make damage dealt and taken 3x for bosses to always drop an expert-exclusive item?

@Jonte This mod does not cause treasure bags to drop. Rather, reducing damage dealt gives bosses a chance to roll their loot table multiple times. Note that's damage dealt , not damage taken . (Reducing damage dealt is what causes damage dealt to bosses to be further reduced based on the number of players, so it's also what causes bosses to drop loot based on the number of players.)

In a Classic world, the only benefit you gain from 2x damage taken is that enemies that spawn near you drop 62% more coins. To have any chance at the Expert-exclusive items normally found only in treasure bags, you'd need to have 2x damage taken and half damage dealt. (Then, you'd have a 67% chance of receiving an Expert-exclusive item each time you defeat a boss. It would be put directly into your inventory, not dropped from a treasure bag. These items would not be usable by the other player.)

If I set my damage taken to 2x on a classic world I'm playing on with a friend with no multipliers, does the boss drop a treasure bag for me and normal loot for my friend?