This is a tough match for me as these are two of my favorite characters in general, let alone in the tournament. Mass Effect 2 is my favorite video game ever, and I have an X-Men tattoo on my left shoulder.
That said, I don't see how Magneto loses here.
Even if Shepard's armor and implants (that's how Shepard has such amazing strength/power/skills) don't have metal that Magneto could quickly use to kill him, I don't think Shepard's biotic powers will be enough to take down Magneto.
Keeping in mind that this is at Acme Looniversity, there will be no shortage of metal props around. Anvils, safes, pianos containing yards of piano wire, goofy bombs with round black shells... Magneto is going to be able to pull these into battle very quickly and send them flying at Shepard. Shepard's biotic might be able to push some of them away, but Shepard can only use his biotics for so long before they need recharging while Magneto can use his powers endlessly until the job is done.
Alternatively, Shepard could rush Magneto with a biotic charge and then hit him with a Nova. The way this works is Shepard uses his biotic powers to send him charging at Magneto extremely fast, bypassing any obstacle in his way. A biotic charge ALSO regenerates Shepard's biotic barrier (think of it as an overshield). Then Shepard can hit Nova, an energy draining move that does damage based on how much barrier Shepard has left (more barrier=more damage). That drains Shepard's barrier, but by that time his charge will be ready to use again, and he can simply regain his health.
Now that I think about it, it's less black and white than I previously thought. I do think the environment favors Magneto, but if you go with Vanguard Shepard he DOES have the powers that could be used to defeat Magneto, and he could reasonably engage Magneto in close-quarters combat before Magneto is able to bring any of the elements of the stage into combat.
It's a toss-up for me. I apologize for this stream of consciousness post, but I wanted to get my say in before I have to go to work today.
Boo work, yay BattleZone!