The 40 piece challenge is a great idea that's misunderstood by most people. I had participated in it for some time in PW and I can say it really did help with my reading and ability to learn pieces quickly.
Here are some points of clarification:
- You're supposed to pick pieces that are way easier than your normal level. You should be able to read through the whole piece and be able to work through all of it in one sitting. That doesn't mean you get it perfect in one sitting but it should be manageable to get through the entire piece and make progress on every part of it every practice session.
- It's supposed to take only a small part of your study time. Pick something that is so easy (see point 1) that you can learn it in 1-2 weeks max working on it 10-15 minutes a day.
- It's not supposed to be perfect. The aim is to get a fairly musical performance and not worry much about note accuracy but be able to play the piece without stopping and without hesitations. It's a bit like the aim of sight reading except you have a week to work on it.
I don't really like the name "40 Piece Challenge" because it obligates you to a certain number. I think 40 is quite achievable if you follow the guielines above but I prefer a name like "Quick Study Challenge". I call these pieces "quick studies" - i.e. pieces that you study and learn quickly to get a musical impression without perfecting the details.