So, we all know there are some issues with 997, especially dual angels, and Overconfidence in particular.
As one of the more prominent exploiters of these balance issues, I'm quite familiar with them, and, much as I enjoy the nice boost to my profile from these exploits, I recognize the need for change here.
I have a few suggestions for how to re-balance these for the next release, and while I don't know if that's already being worked on, or perhaps even completed, the developer posts on the issue that I've read don't seem to imply an extant fix in development, so it might be worth getting some community input on this.
The biggest thing by far, for me at least, is AoOC, and to a lesser extent, AoCn. Both of these provide significant advantages to a player trying to complete a challenge, for several reasons. First, they start with weapons and items that give a significant tactical advantage right off the bat. Second, they save a lot of time on a full run, allowing players to spam restarts without losing much progress, and exploit luck more easily for damage avoidance purposes. On a related note, they provide quick access to challenge required special levels, notably UC, and to a lesser extent, Vaults and Mortuary. Third, they skip the challenging guaranteed levels between themes: Anomaly and Babel.
There are lots of changes that can be made to help with these concerns, and I'll start with the more minor ones and work up.
First thing that comes to mind with this is the Untouchable series. While these medals aren't actually awarded for abbreviated runs, meeting the criteria for the medals also meets the criteria for challenges requiring those medals - the Destroyer series comes to mind. The obvious fix is to simply require the actual medal, not just the criteria for it, while a more complicated solution might be to adjust the medal criteria based on the levels completed - for example, changing the damage numbers from 500/200/50 for the full game to 200/50/20 for AoCn and 50/20/damageless for AoOC. This would allow the badges to still be earned on those challenges, rather then blocked, but it would scale the difficulty for each accordingly.
Next up, starting items. Currently, AoCn and especially AoOC get ridiculous item advantages that go a very long way toward compensating for being CLvl 1 at the start of the game, without even considering the other advantages of the challenges. Making the Daredevil Angels start with the standard items would go a long way toward balancing that overpowered opening. Maybe allowing one extra modkit for AoCn, and two for AoOC, would be fair, but the current three exotics is a bit much.
Finally, my favorite solution - bring back Angel of Haste. Instead of skipping the earlier phases of the game, simply shorten them and scale the difficulty accordingly. Three Phobos floors, then Anomaly, then three Deimos floors/Babel, and finally three Hell floors and Dis. Now we're back to default starting items, so no unfair advantages there. While we do still save some time for a complete game, we're no longer skipping guaranteed levels or granting quick access to deep special levels. We're also still fulfilling the point of the Daredevil challenges - throwing the player into high Dlvl floors with a low Clvl.
Fixing AoCn and AoOC will automatically correct a lot of the current issues with Dual Angels, but there are still other issues. Basically, Dual Angels right now have the potential to aid one of the challenges with compensation factors from the other. To prevent this, all we really have to do is adjust the possible pairings.
AoMC seems to be the biggest culprit here - the way that challenge works is a huge buff to any careful player on any challenge. I would recommend removing AoMC from Dual Angels entirely.
Another one that can be a problem is AoLT. Generally, the speed boost on this one is offset by the inventory constraints on any ammunition based build, but if we pair it with something like AoB or AoPc, suddenly that tradeoff is far more beneficial. We could also look at a pairing like AoMs and AoI/AoP(I don't know if these are actually currently possible, but the point is to look at how pairings work together) - the AoP and AoI restrictions are a lot less meaningful to an AoMs, while careful use of the AoMs levelup boost could significantly aid an AoI/AoP run.
If AoHaste does come back, that might also have some pairing issues - Ao100 comes to mind. While it's true that the difficulty would scale dangerously, Ao100 may provide enough experience to overcome the worst of that scaling, and halving the Ao100 floor count might make that challenge a lot less daunting.
One last thing - I just recently picked up my first, and probably only, Angelic badge. This is something a player of my skill level(or rather, utter lack thereof) should never be able to accomplish, but it was basically handed to me by the way that challenge is set up. AoOC was addressed above. AoSh guarantees a shotgun, which is one of the safest ways to damage dangerous enemies and can also help dispose of corpses via knockback into fluids. And N! solves the killrate problem(50% for the challenge) and the ammunition problem of the shotgun method by guaranteeing infinite respawns when properly played(On a distantly related note, we might consider some balance changes to N!, like preventing corpses from respawning with ammo/weapons, or tracking damage on a corpse and gibbing it when it reaches a point where resurrection should be impossible - the poor former sergeant I farmed on my Angelic run took so many shotgun blasts, from his own infinite supply of shells, that he should have been nothing but a smear on the wall).
To truly make this a challenge worthy of the Angelic difficulty level, why not go with trait restriction? You know what would be a bitch on an AoSh+AoOC run? Killing the mastermind without knowing where it is. Blocking Int would make that final fight a lot longer(and might even drain the massive stacks of ammo a N! doomguy restricted to only one weapon type will have by then), not to mention increasing the difficulty of the regular floors, and making the Scout class a less viable option.