The Day/Night cycle concept is something many things in Simon's Quest suffer from. Great concept, bad implementation. In my game I have certain people that only come out at night, enemies having different strategies at night, enemies giving more experience and higher drop rates at night, certain items that change their use depending on the time of day, etc., just to give you some ideas. Maybe enemies like the werewolf could be like a fighter during the day, but transform into werewolves at night? Insetad of doing more damage they just change the game up. Citizens could still go in at night, but maybe have the shopkeepers hide in a different place and charge more during the night for the price of convinience. (Maybe if they're one of those hidden shopkeepers in the original, they could go to that hiding area during the night?) I also think the churches should always be open since they are your save areas.
TL,DR:
I think it'd come out a lot better if the nighttime was a new world in a way, rather than just turning the difficulty up. There's endless possibilites with this.