I've ran into this situation a lot myself and concluded it needs FAQ.
Nothing in the challenge rules states the outside forces cannot swing if they are within range with an enemy model; even the challenger. Likewise, while wounds can spill out of a challenge, there is nothing stating the wound pool from outside forces are allocated in any way beyond normal combat (which would allow them to spill into the next closest model).
I need to reread the rules around this again (since they are so poorly worded I'm already second guessing myself); however, I'm 99% sure that's what you end up with when you look at the restrictions the challenge produces along with normal assault phase permissions.