mattdm's question is focused on what happens when a paladin marks a target at the end of his turn. What I feel is important here is the first line of the rule:
On your turn, you must engage the target you challenged or challenge a different target.
Sigh, not this again. Yes, Divine Challenge
ends when you fail to engage, or when you challenge another target. Thus, the Divine Challenge you used against your first target is now
over, and any limitations it might apply to your actions are null and void. However, you have now used Divine Challenge against a (different) target, and are subject to all the limitations that entails, including the fact that this - new - Divine Challenge will end unless you:
A) Engage the second, new, target or;
B) Challenge another (third) target
As you can only use Divine Challenge once per turn, you cannot take option B in this scenario, and as it was your final action that turn, you can only qualify A if you are adjacent to your new target, or with an action point spent to attack it or move adjacent to it (unless you attacked it earlier in the turn).
The engaging a target part is applicable to only a foe that has already been challenged. So, in the case of paladin taking down a challenged foe in a round, he is able to use a minor action to challenge another foe elsewhere on the battlefield, whether or not any actions have been taken against it or if it is adjacent.
Emphasis mine. What makes you think that it is not
also applicable to the new challenge target? You have activated your Divine Challenge power, - which, incidentally, ends the challenge you had on the previous target, if they were still alive - and are subject to all its drawbacks.
On the next round if the paladin fails to engage the challenged target or issue a new challenge, he is penalized by being unable to issue a challenge on his next turn.
Flase assumption. The power does not state 'you must engage the target before the end of your next turn,' it states you must engage it 'on your turn.' By using your last minor action to challenge a new target, you have successfully completed the ending condition for the
first challenge, but the
second one now requires you to engage the
second target, or challenge a new,
third target, which you cannot do until your next turn, due to the limitation on Divine Challenge's use.
Powers are not retroactive. Actions that occur before the power was activated are meaningless.
No rule states this. All it says is that I must '
on my turn' engage the target. If I attack, then Challenge, I have, indeed, engaged the target, '
on my turn.' In this case, powers are (or this power, at least, is), in fact, retroactive.