Personally? New models, hands down. Challenge modes are fun, but I prefer raiding and totally new content rather than different modes of content.
So, it wouldn't be worth it to me to have them go back and do Challenge modes for old content at the cost of new models. A few Challenge modes paired with new content is just fine.
Character models, definitely! Right now it's like 8 bit Mario in a 64 bit world...
New content, new models.
Warlords of Draenor hate has become the new "cool". The expansion receives more flack than it deserves, even from people that never played it.
Given the lack of interest in Challenge Modes by the community, I'd expect the majority to ask for new models and I agree, new models please!