[It still says my Legendary is still in progress?]

Did you changed the difficulty at any point? Similar thing happened to me.

[Can you change campaign difficulty and carry on with using the lobby?]

I think this is strange. I started on Normal which was way too easy so had to change this. I noticed after each level completed in chapters it told me I had done it on normal. I thought I found a way to up the difficulty but now after chapters it does not save what difficulty I completed it on. Am I in an online or co-open lobbies by mistake? Can I up the difficulty without this?