Portals can be cast by placing lava with a bucket and pouring water on it.
Obsidian for an enchantment table can be found in chests, if you're lucky or spend enough time looking. (I think it's in villages and Nether fortresses.)
Besides, the challenge allows you to use diamond tools as soon as you find the diamonds, it only restricts what you can make weapons and armor from.
Oh yeah... duh. Thank you. I completely spaced doing that