Interesting topic. I'm not sure if I agree on framework proposed but it does provide an interesting way to look at challenge that I hadn't considered before.
The best way for art games and those are trying to get mass appeal is create a system in which the more you put into it the more you get out of it. For example Tetris is such a system. The more you play and the better you get, the more challenge you are offered and the richer your experience becomes. Doing this doesn't discriminate against players who can't meet the initial challenge, it just incentivises them with attainable challenges.
Games don't have to challenge to be worthwhile. They can just be playful and exploratory, like Kyntt. They can teach interesting things or convey life messages. These things have plenty of value too.
This concept was put into so many games for so long and still plagues us today, but why is it there? It made sense for coin-ops because you had to pay money to get more lives, but look at Super Meat Boy. It says "Why have lives? Why punish the player for dying anymore than the natural punishment of the fact that they don't get to progress until they beat the thing that is killing them?
I'm seeing this thrown around a lot as of late, but I think it ignores two important factors: Challenging games are obstacle courses and beating things (levels, individual obstacles, etc.) in sequence can be a challenge in itself. Also, putting more at stake can make a game more exciting.
I think that the use of lives in games provides two things that sort of rub up against each other. Limiting the number of lives provided can be perceived as a challenge. Challenge, especially those that we feel are doable, add to intrinsic motivation. On the flip side it can be perceived as punishment, punishment kills intrinsic motivation. It's all a matter of how these things are perceived by the player. Super Meat Boy is actually a fantastic example of using both well. In the warp zones and negative levels you have limited lives unlike the standard levels. This adds an element of risk(or tension) which elicits different(more conservative?) types of play.