What is the current community opinion on this action. While certainly a downvoted is a very clear way of leaving direct feedback. I feel that downvoting a question that is already on hold is almost like "kicking someone while they are down". My question is, should we downvote such questions or should we actively edit it to make it better and reopen?
Voting and closing serve two separate purposes, so doing both can send two separate signals. The purpose of a (challenge) downvote, as per the tooltip that appears when you hover over it, is:
This question does not show any research effort; it is unclear or not useful
Granted, the description is a bit out of place on PPCG, but downvotes should be used for challenges that are low-effort, unintelligible, or otherwise of poor quality (underspecified, etc.). A downvote "nudges [a challenge] 'down'" so that our best challenges rise to the top.
Accordingly, you may want to vote to close but not downvote a challenge when you believe it is high in quality, but has other problems in its current state. If a question is clear and on-topic but otherwise low-quality (maybe it's unfair, overly arbitrary, or just a bad challenge), you could downvote without voting to close.
On the other hand, closing a challenge serves as an indicator that the challenge is "unreasonable to answer in [its] current state, or [does] not belong on the site". Putting a challenge on hold simply marks it as "unsuitable for answers, for now." Closing a challenge and upvoting it, downvoting it, or not voting at all are all perfectly reasonable in different situations.
should we downvote such questions or should we actively edit it to make it better and reopen?
Downvoting and editing improvements into a challenge are not mutually exclusive. That's why edits clear the vote timeout so you can reverse your downvote—if the challenge has been sufficiently improved after being edited, you can undo your vote or change it to an upvote. Downvoting a challenge while it is worthy of being downvoted is a good thing.
Downvoting is for challenges you dislike (perhaps because they are trivial, or they're just not interesting to you).
Close-voting is for challenges that have serious content problems and need to be closed/put on hold in order to work them out (duplicate, off-topic, unclear, too broad, or opinion-based).
These are not mutually exclusive. It is perfectly reasonable to downvote a challenge that you dislike because it is trivial and cast a close-vote because it isn't entirely clear.
Voting on closed/on-hold challenges is perfectly fine (if it wasn't, you wouldn'e be able to do it). The score of an on-hold challenge can be an indicator of how much the community would like to see the challenge fixed - an on-hold challenge with a positive score would likely be well-received if the content issues were fixed, but an on-hold challenge with a negative score is probably not worth the effort to edit and reopen.
(Down)voting and close-voting serve two separate purposes. It's perfectly fine to do both, if you think you should.