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Per the Challenge rules, the C'tan shard can only allocate his wounds to the enemy. So what exactly should happen when the time comes to put down the template from the powers description?
For those unfamiliar with this power of its, here it is:

Necron Codex pg 41+Errata wrote:
Gaze of Death
In the fight sub-phase phase, after all other blows in the C'tan Shard's combat have been struck, center the large blast marker on the C'tan Shard. All other models beneath the marker (friend or foe) suffer a strength 3 hit with no armor saves allowed. If the C'tan Shard causes one or more unsaved Wounds in this manner, it regains one Wound lost earlier in the battle. These Wounds do not count towards combat resolution.

The template comes down and models are hit, following the codex and as such, following Basic vs Advanced on page 7.
The template comes down and models are not hit, but that many wounds are caused to the challenger of the shard, following Outside Forces on pg 64.
Roll off?

Anyone know of other issues like this with other armies? Id love to hear what the community thinks of this.

I say the power works as normal. Its at the end of the combat, the challenge is during.
That's my interpretation anyway.

I agree, the challenge doesn't make a difference. The power is still used

You don't stop scattering blasts on combat attacks, or vehicle D6 explosions.

Strangely enough there is not as much of a conflict as you'd think between those two rules: The wording for 'Outside Forces' can be read as not stopping either character in the challenge from wounding 'other' models in the combat, just preventing the other models from returning the favour.

"...'Wounds from other attackers cannot be allocated against either character - simply resolve the wound allocation step as if the two characters were not there..."

I suspect this is more due to poor wording than intent however. Then again, it can also be read as removing the actions of two characters from the wound allocation step altogether; meaning they'd just flail ineffectually at each other as they'd be unable to allocate wounds to anything; having been summarily ignored during wound allocation. (Given the latter interpetation is fairly counter-intuitive i suspect such was not their intent either.)