At first, I thought you were out of your mind. Then I digested it.
I think this could work, I think I could even run something like this.
First, I would chuck the actual D&D Mechanics. Keep the cosmology stuff though.
Since I don't know the other characters...yours would be challenged by the other bastard children of AO. They are not gods, so your stone, is not a big help. And I think one would be in service to entropy.
Then, the sessions would span actions of weeks and months. You would be stymied without knowing how or why, and you would have to figure out who/how/why.
And if you ever. ever. wound up in Sigil, the first person...the very first person you see would be her greatness the Lady of the Blades herself.
I would not run this to be mean or hostile to the players, this is just what I see as a good campaign focus.
So, to the point of your question, I think your group has to have a big sit down. I think you are either using the wrong system, or the DM is not suited for this (And he could still be a great DM in general), or a bit of both.
But that is just my 2 cents.
Sounds like he's already doing that, and I don't think anyone here suggested that challenging the players is restricted to combat. The books are guidelines and if he has found that, because of the nature of the campaign and character builds, he needs to make some adjustments, then the players won't always know just how things are going to turn out by knowing what's in the books, and I think you're being well challenged. I'd suggest less quoting the rulebook to the DM and more player of characters to figure out what to do when knowing the rules doesn't get you what you expect. Of course, we only have a limited amount of information on which to based the advice we give in this thread.
to rkwoodard: At least I finally hear someone else that likes the idea lol, I like your idea alot, and we might play around with it a bit, though it wouldn't be anything like the original plot, currently the main challenge with her is to find how to gain more power then she already has and to weaken the gods.
and to Mark CMG: sadly enough he's not challenging us at all. he's simply making up things on the go without any reason too other then because he doesn't want us doing something we always normally could. (it's like a cleric not being able to heal a party member for a reason that makes no sense like 'your spell does nothing, you don't know why, it just doesn't", with literally, no reason why) a challenge would be a mortal with a brilliant mind on the side of good with enough standing that if he vanished too many would talk, things like that.