Distinct from #562, which sets the free cards the AI gets. This refers to the Dungeon Rules in AdvStrings.txt::CAVE_SHOWCLUES:

• No [Colorless/Black/Blue/Green/Red/White] cards allowed.
• One deck for all duels.
• No artifacts allowed.
• No instants or interrupts allowed.

and in particular the next two, the first of which is apparently always in effect for castles, and the second for dungeons (though perhaps that's changed by difficulty? I've only ever played on Wizard):

• Life losses carried over.
• Remaining life added to next duel.

Remaining life added to next duel has always been horribly exploitable, and now we have Beacon of Immortality and Serra Ascendant and Felidar Sovereign and eventually Blood Baron of Vizkopa and Test of Endurance and Divinity of Pride and Rune-Tail, Kitsune Ascendant.

The deck-construction restrictions from Manalink's challenge mode are a good source of ideas, though it's an open question how they should be enforced. For example, for the "no [color] cards allowed" and "no artifacts allowed" and "no instants or interrupts allowed" rules, illegal cards are just removed from your deck; that's much less workable for "you can't have more than one copy of any card other than basic lands", and even less so for "you must have at least 100 cards in your deck". Maybe make them replace illegal cards with random basic lands, like if your deck size is too small during an overland duel.

Other possibilities are giving the AI a planechase or archenemy deck, though that's maybe more suited to the free-cards interface.

I'm also unsure how frequently the first set of rules (no [type/color] cards allowed, and one deck for all duels) are assigned. They seem pretty rare, though maybe that's just because the life-change rules are always in effect.