After you do the bandit quest (in either of the four ways you can complete it), go into the Waterfall Caves that come after Pools and Streams. After quite a few maps you'll come to an alter thing which you use, and after a short wait (10-20 seconds) the entrance to the next difficulty will open up.
If you use the alter and log out or go away before it opens up, you might still be able to teleport to the next difficulty via your map.
The game's currently a bit rough around the edges for the transition here. Putting in Act 3 and overhauling the story a little is the main thing the devs are doing before the game goes into open beta in a couple of months.




