I don't think that Divine Challenge, in its current form, is really broken. The Fighter-Paladin Challenge Lock is a powerful maneuver, but not that easy to sustain against enemies willing to shift, take attack from fighter, then move. Yes, I'd make sure my paladin always carries plenty of, say, throwing axes to try the trick. But I can think of many scenarios where staying in melee with the marked opponent and being able to flank, lay on hands, and actually use your at-will and encounter powers will be worth it.
What I'd never do, however, is cripple my PC by playing the Archer Paladin with no proficiencies, virtually no class powers, and just one class feature, just to get the combo running. Not when I can take a ranger and just give him this:
Soldier of the Faith Str 13, Cha 13 Paladin: skill training, divine challenge 1/encounter
Getting the trick on a character with actual ranged capabilities should be much, much better. You lose the ability to repeat the process in encounters with several enemies, but I find that acceptable. And if you get stunned or are otherwise unable to sustain the Challenge, you're screwed. At least you still have regular ranger damage.
Something that could be, if not broken, REALLY annoying, is a party where everybody (including, of course, a fighter) multiclassed to paladin. I'll have to playtest that, some day.
(I am aware that getting the Str and Cha for the paladin feat isn't exactly free, and that using the Challenge can interfere with other class features such as Hunter's Quarry. But it still beats the single class ranged paladin build, IMO)