So here is the question. If a challenge is issued to my Priest on the engine. Can't I refuse since I have 4 other skinks to jump in the way and take it.?
Nope. The steg is one model, not a unit. The only way you can avoid the challenge is if you have another unit on the same arc in combat with a unit champion who can accept instead of the priest.
tbh i find it a good thing to get him into a challenge, less guys to stab the priest right? plus the steg still gets to try and stand on them
Depends on what you are challenging. The vast majority of combat characters in the game will have no trouble with the priest, even with his 2+ AS, and the steg will usually go last unless you charged. If it is just a unit champion and you can't wipe out the whole front rank before they attack, then yeah it might be worth it.