I think that was one of the truly hard battles on Normal mode...so I can imagine how bad it'd be on Hard.

It can be illegal to miss.
I hate this one too, since in the end, it is completely up to luck.

It can be illegal to use a certain race (ergo your beastly Nu Mou Black Mage is now barred from combat)
I never really had a problem with this since I always had at least one unit of every race. Sadly I think I had just one lone Nu Mou at the end of the game, for some reason I just didn't like them in this one. =(

It is illegal to do more than 50 damage.
It is illegal to do less than 50 damage.
These are weird since it's like the game is seeing if you're over or underleveled or something, I usually ended up just breaking these since they were annoying.

I'm pretty happy they let you choose if you can break the laws or not because some of them (like only moving 1 tile at a time ugh) were really hindering. I remember one battle involving Vaan and Penelo being controlled by the AI, and you had to protect them. But you can only move 1 tile at a time...so it's almost impossible to win without breaking the law due to the AI not being the smartest and Penelo taking pretty heavy hits.

I agree, something like an "always obey the law" challenge or something could be interesting, especially with the many situations like the above they put in the game.