Preheat oven to 180°C (350°F). Slice the challah into about 1.5-cm (1/2-inch) slices, cut each slice in half, set aside. Butter a 32 x 20 x 6.5-cm (12.5 x 8 x 2.5-inch) oval baking dish and set aside.
Make strawberry sauce:
In a saucepan combine the strawberries, sugar, vanilla bean paste and lemon juice. Cook over medium heat, stirring ocasionaly, until mixture comes to a simmer. Cook like that for about 10 minutes, until the sugar dissolves, the strawberries release some liquid and become tender. Remove from stove and let cool.
Make vanilla custard:
Whisk sugar and eggs in a medium heatproof bowl, set aside. Place milk and cream in a heavy saucepan, scrape in seeds from the vanilla bean and add the bean too. Bring to a simmer over medium heat, discard the vanilla bean pod and remove mixture from heat. Gradually pour into the egg mixture, whisking constantly as you do this.
Assemble the pudding:
Arrange about 1/2 of bread slices in the dish, just enough to cover the bottom while still having some space between the slices. Spoon half of the strawberry sauce all over the slices. Top with the rest of the challah and strawberries. Slowly pour over the custard. As the bread soaks in some of the liquid, gently press down the top layer with the back of a spoon.
Lastly, arrange 3 sliced strawberries over the top of the pudding. Place baking dish in a roasting pan and add enough hot water to pan that it comes halfway up the sides of dish.
Bake pudding for 50 minutes or until just set in the center (use a skewer to test it), remove it from the oven and let stand in water bath for another 30-40 minutes. The pudding should be completely set, the custard should not be runny and the strawberries will be nicely roasted. Remove dish from pan.
Sprinkle pudding with powdered sugar and serve. Spoon pudding into bowls or cut into slices and serve with whipped cream.