I think the lobby as of now is fairly functional, however I think that instead of worrying about balancing the game for number of items drawn, balancing for 2 or 3 players, or worrying about what items are too powerful, etc. Simply allow the lobby host to modify those things for each individual game. My suggestions include:
The ability to change the rarity of items, the amount of each item that can be in play at once, or altogether ban items.
The ability to change the amount of items drawn each round, with the options to set a range of items per round or stick to the default randomizations.
More options for number of rounds in a game. As well as the amount of lives per round.
A range slider for the number of shells loaded each round.
As for all of these suggestions I think the ability to modify all of these settings differently for different rounds in a game could also provide a lot of entertainment. (I.E maybe i want the first round to have no turn skippers and only 3-5 shells per round, but I want the second round to have access to turn skippers and have 6-8 shells per round.)