This is one of the last challenges, providing one of the two necklaces in the game, this one being definitely harder to get, and not just for the battle itself (unfortunatelly there's only a slim chance assembling an able group, and even less to encourage them to make this challenge multiply times in a row (to everyone gain the special item at the very least).
Stage 1 is scary, but as usual allows a more streightforward tactic.
This time you'll face as primary problem a bounch of heroic cavalry busy chipping away your Bone Walls - what trust me on this will likely NOT respawn when reaching 0 HP this time.
It is very important to dispose them as soon as possible, and that means you'll need a bounch of elf spearmen. Or anything else with spear. Does anything else aside elves have spear? Vigilance Spearmen on top of it, as you'll likely be breached once or twice.
The other peoblem is the rest of the enemy, who both have armour and healing, making them difficult to kill (although usually this is a smaller problem). Dread Phantoms are heavily suggested for this level they being able to tank you for a long time AND being able dealing damage through armor.
1-2 heroic unit in each person's deck may allow the team to fight against Sudden Death when the AI runs out of cards, what will happen soon. This means bringing 15 card decks - this'll both make it reliable to pull up the elves at the beggining, and the battle don't last much longer anyway.
HINT: try to hold to your last card, whatever it is, to be able to remove unwanted cards speeding up the end-progress (eg. removing lizards to give space to heroic units).