can't tell you anything about house rules, as I never used them in such a balanced game like this, but I've tried almost everything in the Runebound series and have something to share.
More importantly I'm worried about the expansions. I was rather sad to see that not all of the additions are still in print like the Weapons of Legend pack. I was more unhappy to see that the big boxes don't combine, like in Talisman.
Talisman and Runebound are very different and so are the ways of expanding the game. In Talisman you'll look for variety and surprises; in Runebound, you'll look for environment and storyline. Provided you understand this, you won't be unhappy with Runebound giving you a new map and setting with each big box expansion, as an alternative to the base game "Rise of the Dragonlords" tale and geographical region. This has the big plus of making an expansion wholly enjoyable when played, while games like Talisman (or Arkham Horror) tend to put everything in the cauldron, until you won't "feel" the presence of every single expansion anymore. There's variety and there are infinite funny card combinations, but no coherence, no definite setting. This is not bad, as I also enjoy playing Talisman a lot, with light-hearted spirit; I still think Runebound is an immersive storytelling game, based upon a simple and clear game system that rarely has flaws or ambiguities.
1. Best big box.
It is a matter of personal taste. Which is the geographical/thematical setting you like the most? Sea and pirates? Desert and legendary quests? Artic and lost civilizations? Jungle and primal gods trying to awake? Then, there are some considerations that you will make after some games...
Island of Dread (IoD) is my least favourite because it does not change the gameplay too much except for the chance of taking a ship and voyaging the sea. Basically it's the same as the base game with a more challenging Endgame and with a deck of Sea Challenges, whose difficulty is variable. This is the expansion biggest flaw IMO, because it breaks the linear progression of the game adding steps of random difficulty, which can be ridiculously easy (most of the time) or unfair for your level (rarely). The expansion has some must-have parts such as the new Heroes and Market Items, which you can seamlessly include in the base game, but it suffers from a lot of typos and printing errors (fixed by FAQ). Considering the other expansions is absolutely not the best.
Sands of Al-Kalim (SoAK) are an exceptional improvement from the previous expansions and the basic gameplay. They bring the desert environment to life and populate it nicely with myths from the Arabian Nights with Terrinoth Restyling. The idea to win the game not by slaying tougher Challenges but by completing Legendary Quests is far more epic and challenging, but it requires longer gameplay and not everybody has the time for it. There's a bunch of great ideas like Survival Gear, Day and Night rules, Lost Cities, Sandstorm, Story Die. This could be named as the best.
Frozen Wastes (FW) is nicely themed and the artic environment is rendered with accuracy and flavour. The expansion has a nice search and travel objective, far preponderant if compared to the challenges, which are a little bit too lame considering the powerful Legendary Items that you can find around. The final boss can be either redeemed by finding his lost wife (the Princess) or kicked in the ass until he comes to his senses. The second option is by far the easiest. There's also an alien theme in this expansion that may not appeal to everyone. This is a good expansion for many reasons, but not the best.
Mists of Zanaga (MoZ) is the last and surely the less played Runebound expansion. It shines for the quantity and quality of the ideas and the setting is really nice, even though is a lot focused on combat (with Roaming Monsters) and the Rituals make the game harsher to survive and to manage. It is for experienced players, who can understand its subtleties and a couple of critical imbalances which need to be discussed in an appropriate post. Well, I still think this one could have been the best if some mechanics were better devised, but it's still surprising for richness and freshness of its contents. Might have been the best.
2.Can you combine the adventure decks into the normal games or do you just replace cards?
I think you're talking about the "Adventure Variants". These are "story-based expansions" and you have to integrate them with the base deck. Most of the AV introduce new rules, winning conditions and endgames, possibly substituting one or more of the base decks. When the AV replaces a deck, you only that for the current game; if a deck is not replaced, you continue to use the base game deck and the integrations you've put into it (see below). The AV cards have different card backs and cannot be combined.
3.Can you combine the challenge decks into the normal games or do you just replace the cards?
Yes, Challenge Card Expansions are meant to be shuffled together with the base deck. The cards have the same back as the standard decks and can be seamlessly integrated. I suggest that you remove all expansions after each game, but if you like you can do the same as Talisman with these ones.
4.How exactly do the character expansions work?
Now you're talking about "Class Decks"; I admit this is the only portion of the Runebound product line that I've never put on the table. I bought all CDs for completion's sake, but the rules seem a little bit outstretched to me. They add a lot of interaction between players and a sort of meta-game inside the standard Challenge-based Runebound, which I'm not sure I will like. Have a look at the Rules section if you're interested.
5.Which item and ally is the best?
There are infinite Item & Allly combinations, considering all the expansions. No Item/Ally is good for any Hero, but there are Items/Allies which work very well with your particular Hero. Allies are easier to evaluate, because they help you a lot in the beginning but become dull "meat shields" in the final challenges. For this reason, the best Allies are the ones with abilities that sustain your Hero (Burning Priest, Rune Seeker, Runemaster Baras, Cardinal Koth, Sir Gareth the Black).
6.Finally has anyone thought of a way to combine the big boxes. Like maybe the original is lvls 1-10, the next box we go to is lvl 10-20 the next is lvl 30-40, and so on. Maybe you increase all the stats by like 10-20 Greens get +2 hp and plus 4 stats Yellows get +4 hp and 6 stats, and so on along those line. I do realize this would make the actual game take stupidly long, but that doesn't matter to my group.
You're free to do this "stupidly long" thing if you have the time and will, but I don't see how putting different stories and environments one after the other will make for an interesting game. Big boxes are meant to be played alternatively as different settings, atmospheres, regions, quests; each has his own flavour and playing them one after the other, as a single entity, is like mixing different cocktails together and get an unsavory, disgusting mess. Or, if you prefer, it's like reading "Elric of Melniboné", "The Lord of the Rings", "Conan the Barbarian" and "The Chronicles of the Dragonlance" one after the other and pretending they fit together. Some of the expansions (IoD and SoaK) take a longer time to complete; if you're playing with 4 people you still have a 3-4 hour game in front of you, with no need to scale the difficulty to stretch the length for some MORE time.
I hope to have answered to some of your doubts and curiosities, and to others as well.