Depends on how the multiplayer is structured.

If there's a central trusted server (like an MMORPG), the actual damage values can't be adjusted. Similarly, if all the players simulate the game in parallel (most RTSes), adjusting the damage values will just end the game with a desync. The only case where adjusting the damage values is a problem is when there is a single player acting as the sole source of truth. Then you have to trust the person you are playing with. (Even then, there are plenty of modded Minecraft multiplayers out there, who advertise certain mods.)

Changing the graphics is more of a problem. Unless you are going full Stadia, everyone's machine has a copy of (at least part of) the game state that should be hidden from the player, and mods can reveal some of that. For instance, showing outlines behind walls, making heads big, having people blink red when they start charging a major power.

But making the configuration files in one text format vs another is unlikely to make it more or less difficult to change the graphics settings. Even games without any text config files get cheat mods.