Since hard requires more than four (non-thumb) fingers, one has to reposition their hand while playing.
What is generally considered the easiest way to approach this?
(Start low, and never reposition any finger other than the index, move all four together anytime you don't have to play the 1st and 5th together, etc.)
The first tip I have is a bit cheap -- if you have a Rock Band Guitar controller, then you can use the higher frets (the ones closer to the guitar body), which are much closer together than the lower frets.
As far as hand positioning, this is a common issue that happens all the time when playing actual stringed instruments. Musicians on violin, for example, have some terminology associated with different positions of the hand.
First position is the natural resting position for your hand, where your 1st finger (the pointer finger) is on the 1st fret. Playing the first three frets is very easy, while playing the 4th fret (pinky position) is slightly harder and playing the 5th fret by stretching the pinky finger is very hard.
Second position is where your 1st finger is on the 2nd fret, with your pinky on the fifth fret. Playing frets 2 through 4 are easy, the 5th fret is a little hard, and playing the 1st fret by stretching your pointer finger backwards is very hard.
Third position is where your first finger is on the 3rd fret. Playing the 1st fret is impossible, the 2nd fret is difficult, and the rest are very easy.
In high level play, you have to learn how to shift between positions. You cannot stay in first position forever; stretching your pinky to hit the 5th fret is meant to be a stopgap solution and will wear your hand out on serious songs. Eventually with practice, after you are comfortable with shifting, it will become much easier than stretching you fingers.
For example, certain patterns are very obviously meant to be played in one position than any other. A fast 5-4-3-2 pattern can only be played in second position, and similarly a 4-3-2-1 can only really be played in first position. The game will frequently do things like make you play 5-4-3-2 4-3-2-1, forcing you to shift between second and first position quickly. This is why you have to learn how to shift.
Also note that shifting positions incurs a certain cost - it takes time to move your hand, you might miss the proper position while you are doing it, it takes brain power to remember which one you're in, etc. You have to weigh the advantages of using the best position with shifting too often.
So, returning to your original question: the correct position that you should be in depends highly on the song and the phrase you are playing. If the song most takes place in the first 4 frets and has an occasional 5th fret (like some medium songs), then it is not worth switching to another position. If it takes place mainly on the top 4 frets, then shift to second position. If it's a fast succession of two notes like frets 4 and 5 (a trill), switch to third position so that your pinky won't have to move too quickly.
I always move all the four fingers, since in most songs you'll get a stream of notes on that side.
Off course, when it's only for a couple of notes you should only move your index finger or pink to get the one/two notes at the edges.
However, this might vary between songs, but luckily you can practice what the best strategy is for each song.
I vary my technique by song, and even throughout songs. Sometimes the "high" position is better, sometimes "low" is better. On rare occasions I reach the last button with my pinky while keeping my other fingers on the top three buttons. That takes some practice, though, and usually isn't necessary.
Keep your thumb pressed to the bottom of the neck - don't hold the guitar controller like a baseball bat. And curve your fingers so that more of the tip of your finger hits the button than the pads. The right grip will allow you to move faster.
Generally, using 4 fingers as opposed to 3 will make your life easier on more difficult songs since you will need to move your hand less, but in either case, shifting your hand position on the fly is a must. To use 4 fingers, you must practice using your pinky to strengthen it and improve its dexterity. If that simply seems too difficult, you can just stick with 3.
In extreme cases (such as attempting Through the Fire and Flames on Hard or Expert), there is another, radically different method you could attempt which may make your life easier: use both of your hands to hold the frets, and your elbow to strum. You should probably only attempt to do this while sitting down, so you can rest the guitar on your leg. I have never used this technique, but I have seen it in person, and it did indeed work. So, if all else fails you on the hardest songs, you may want to try this method. A close alternative would be to sit the guitar on your lap and play the frets like a piano, with your fingers and thumb, but personally, I think doing that would defeat the purpose of playing a fake guitar...
I think it's largely personal preference. I don't actually use my pinkie finger all that much on hard/expert, except on 3-note chords or sections where it just makes more sense. I freely move my index finger to the red or yellow button as needed. With some practice you don't really have trouble knowing where your index finger is.
My super-secret special technique is to use one finger for each button.
Wrap your thumb around the neck of the guitar and use it to press the green button (The colours are the same on both GH and RB guitars, right?). Use your other fingers for the other four buttons.
Rotation of your hand around the neck may be required to change from low button presses to high button presses, but I find this easier than moving up and down when using just four fingers.
I've been using this technique to play the GH5 career mode on Hard, and this is my very first plastic-guitar rhythm game (and I've only had it a few weeks).
