So this is an attempt to put together a challenging game mode that uses more soldiers than are needed for careful vanilla play.
Assumption is Legendary Ironman settings and presumes a degree of competence playing the game.

These mods are all game altering. Cosmetic stuff not included, nor the informational mods. I've had a lot of problems with the 'camera stuck under the avenger' bug and these listed mods all work fine. I don't run with many UI mods as these seem to be the biggest culprits.

The Concept
I want to play with a few new classes, and I want to cycle through more troops without having a permanent A team. I want to deal with the deck I'm dealt rather than picking an A-team for every mission. I want more troopers on the field so I can have more epic battles.

Difficulty
We spike the difficulty with...

• A Better Advent 2 - This is a highly polished enemy mod that increases pod intelligence, composition and as the game goes on, pod size. A one-stop-shop for making Advent far less stupid.
  
• Wound Recovery Times - This is an ini tweak to make wounds scale better. Light wounds have lower recovery times, but heavy wounds can be up to three months to recover (without a staffed AWC) See Discussion for settings.
  
• Soldier Fatigue Updated - Forces troop rotation, especially when combined with...
  
• Squad Notoriety - This forces quite an extreme squad rotation if you can't play around the deficits that a high notoriety team provides.
  
• Squad Morale - Not only do they get tired, and famous, they get demoralised too.
  
• Better Scanning Sites - Because we have to do a mission to get our rewards, we fatigue more soldiers. Sending fatigued soldiers out becomes an option/requirement in order to complete the story missions as well as scanning missions. We also have to tweak the XP curve a bit because our troops are doing more missions. The default 'doubling' feels too heavy handed as we're running Fatigue & Notoriety, but it does need tweaking a bit. See ini edits discussion for details.
  
• Grenade Damage Fallof - Reduces the power of grenades which are pretty OP.
  
• Extended/Additional Dark Events - Not really more difficult, but shakes things up a bit.
  
• Psi Rebalance - I basically agree with everything the author put in the mod description. Psi is a game changer for every playthrough I've done and rather than just not use it, I've opted for this version instead.

Ease
We make things easier with...

• Long War Toolbox - Start with a squad of 6. Get the GTS Squad I & II upgrades when you're eligeable.
  
• Custom Classes - My Paragon Class mod, using LW Perks is where I want the balance to be.
  
• Configurable mission timers to add 1+(0-3) turns to all timed missions. Sometimes it's really easy, sometimes it's bloody hard. This can also work out of favour on new 'survive for x turns' missions.

Both

• Long War Toolbox - Not Created Equal, Red Fog (all), Hidden Potential OFF as it clashes with Morale.
  
• Varied Mission Types - These can provide a much needed source of rookies and xp but the missions are tough in the first months.
  
• Various ini Tweaks to alter the game experience.

If It's Too Hard
If these settings are too difficult, you can add some optional extras. Ive not added them to this collection, but you can search them out easily enough if you like.

• Starting scientist & engineer (you get to start with a single scientist & engineer and can get cracking immediately. Helps the early game quite a bit.
  
• Scientist staffed AWC (uses a scientist to staff the AWC rather than an engineer)
  
• Landed UFO from day 1. I've only ever had a downed UFO on my first playthrough on Rookie difficulty. I've never seen it since on Legend, and I like the idea of actually seeing one occasionally. UFOs are tougher than Supply Raids (IMO) so this is a mixed blessing.

Overall Comment
I'm still playing through this set of mods - playtesting and updating the collection. With MoreScanningSites it's getting quite long war-esque. The overall campaign length is about the same but it takes a lot more missions to get there, as every reward has a mission attached and with more enemies, it all takes longer.
I'm finally getting to know my 30-40 troop roster and everyone is getting a turn on the field. I have maybe two A list troopers, but everyone else is not far behind.
There are some RNG elements that are game changers. 50% reduction in scan times, and 50% reduction in current research as hack rewards, as well as rushed researches from the Black Market can really give you a leap forward. Especially with more loot allowing you to collect datapads for Intel. If RNG swings the other way though, the game can get ugly fast. Not sure how to counter this (other than remove that functionality) Mag weapons and a few promotions quickly make your squad a force to be reckoned with.

There are some popular mods I haven't included because I haven't tried them yet, and some I want to refine.

• Grimy's Loot Mod : On the surface it looks like it makes things a lot easier, so I haven't tried this yet.
  
• XP curve : Still needs some tweaking I think. There are more missions per month, but your soldiers are wounded, notorious, fatigued, or stressed, so you're rotating and not levelling up as fast as you would if you didn't run those mods. My final playthrough before publishing this collection will be at about 1.5x the Legend requirements.

• Psi Rookies : I thought that Psi rookies would reduce the game changing impact Psi can have, but it didn't. I was just OP earlier.
  
• Early Game Difficulty : I tried shifting the HP awards from level ups, to adding them to the HP at the beginning (all troopers start with 8 HP and only get another +2 with promotions, rather than 4HP then another +6 in promotions) It worked, but the housekeeping of altering all the classes, as well as all the class mods was a pain in the backside. Especially when a class was updated and the edits were over-written.
  
• Armour as Armour : I'm going to go back to this one. My only campaign of this expired with the Doom counter. It makes early game a bit easier, and late game far more challenging - which is a great thing. I was panicking about meeting Sectopods & Gatekeepers though. Must come back to it.
  
• All Soldiers Gain XP : This makes the early game too easy unfortunately.
  
• Engineer2Scientist : Again, this reduces the Engineer requirement allowing an easily staffed AWC which mitigates a lot of the wound timer changes. Staffing an AWC should have an impact, and this mod removes that impact.