That description reminds me strongly of Skyward Collapse, actually. Not in a bad way.
Heh. I really should play some of your guy's other titles. Just that, generally, it hasn't been what I've been looking for lately.
But Master of the Monster Lair isn't quite like that. You literally have a magic shovel and dig out the dungeon ah la Dungeon Keeper: pick a tile, make it air. Your limited in size and you need to have a certain amount dug out before you can dig the "down stairs" to the next layer. Well, actually, you need to have a certain number of monsters, if I recall correctly, but as they all take up space and you want to be able to walk past them all without fighting in order to get to the stairs, then yeah, there's a functional limit on how tiny the floor can be.
So, you dig the tiles, you place objects, you fight the monsters for money, either when you die or you decide to leave the dungeon, you go home and have dinner, which raises your stats. Dinner is based on the food you buy with the money you got (along with other things, like the objects or better gear) but no matter what there's always a basic soup your mom can cook that will still increase something.
It's not so much a "balancing act" of opposing force, but more...self-imposed challenge (you CAN design your dungeon to force you to fight every monster every day, but you don't HAVE to, and it's a long-term bad decision, as eventually you'll be too high a level for those monsters to pose a challenge, and once you dig the down stair you can't change the floorplan).
Kind of what I see as "Arcen doing Dungeon Crawling" with this idea in mind would be something like Rogue Legacy...except that the player also builds all of the individual rooms (but the engine arranges them to make a castle). You can design a room that's hard to navigate and fight in, but the rewards for beating it are greater than a simple empty room. Etc.
Either way, whatever you guys do, this genre or another, I'll be excited to see it.