Having some optional hard modes safely tucked away in an instance doesnt make a game challanging. It makes one tiny area challanging which you dont have to in order to progress.
Leaving the safety of a town and venturing into the wilderness and facing mortal danger would make the game challenging. Instead Blizz has made everyone near indestructible demi-gods - i could count the number of times i died whilst leveling from 70-80 on one hand, and i am in no way a super skilled amazing player.
And having a few endgame instances, Naxx40 & AQ40, made vanilla WoW so challenging? I don't recall ever being in mortal danger when leaving town.
And how is this different to any other game. I don't recall Half Life 2, Halo etc being challenging in the default mode but if you whacked the difficulty to max.....