The "New Battle" menu is already nice and especially useful for testing and debugging.
But maybe post 1.0 it won't be needed in the main menu anymore and could be replaced by a Skirmish button.
The overall idea is to get a challenge but not in a full game.
Essentially it is the same thing just with less options and more balanced, but still random.
You'll get soldiers of various ranks with sets of equipment, matching in level (not normal rifle and a blaster launcher in the same team) and matching alien opponents. The "Mixed Race" seems to be a great choice here.
The choice then would be
* the the general mission type (ufo, crashed ufo, terror, base assault, base defend. no mars since it is a story mission).
* soldier stats/equipment level
* alien stats/equipment level
* difficulty which shifts solder and alien stats/equipment up or down. Very easy is soldiers with heavy plasma against plasma pistol floaters, inhuman is rifles against mutons with a blaster launcher.