All I need out of challenges is a sense of accomplishment. That is enough of a reward for me, everything else is extra.
In fact, I prefer when challenges don't have any rewards, particularly super hard challenges. A challenge mode is just an extra content, but having it be required for an unlockable (be it a level, or a character, or whatever) can be pretty annoying. I mean, I'm completely OK with it (Final Destination's unlock process in Melee is my favorite and I loved getting the Hayabusa armor in Halo 3), but I can see why some can take it differently when something they want is locked behind something made for experts, or something that requires too much time. I'd prefer if the reward was something like a medal or other minor things that showcase your accomplishment.