In God's favour or damned? (7)
I believe the answer is:
This clue is a double definition.
'in god's favour' is the first definition.
(blessed by God)
'damned?' is the second definition.
(both are mild expletives)
'or' is the link.
(Other definitions for blessed that I've seen before include "Endowed", "Sanctified", "Highly favoured or fortunate", "Bedless (anag.)", "in heaven".)