I'm not sure what to say about the Arena faction. It doesn't have any normal quests, although there is one side quest for the Gray Prince (the current Arena Grand Champion). The Arena is open from 9 AM to 9 PM each day. The exceptions to this are your match against the Grand Champion and any matches you fight as the Grand Champion. Those can be done at any time of the day or night.

The least risky way of participating in the Arena is to bet on matches. Talk to Hundolin (the fellow next to the chest - it has 500 golds in it if larceny is your thing) and place your bet. 25, 50 or 100 golds on either the Yellow or Blue team with double that back if you win. The odds start at 50/50 with both opponents being equal. However, each opponent gets random equipment ranging from none to the really good stuff and that's where the equality ends and luck comes in. Your Luck attribute does have some effect on the fight, but not on your team's equipment. Each point of Luck over 50 adds one hit point to your gladiator. So however you can boost your Luck is all to the good. It may not help much if your gladiator ends up with bare fists against an Elven Claymore, but if the load-outs are fairly equal it can let your guy stand long enough to get in the last shot. The Lucky Old Lady statue in Bravil will give you a 10-point Luck boost that lasts for quite a while. Otherwise, potions, items, spells and the like are all fair game.

If you choose to participate by being a combatant, the whole point of the exercise is to get in there and fight for your life using almost any means necessary. Each match that you win nets you one point of Fame, but except for your fight against the Gray Prince there isn't any loot to be had other than the golds that you get for winning.

So here are the rules:

  1. you fight for the Blue team and you have to finish all bets with Hundolin before you can get a match.
  2. you have to wear a standard Arena raiment. It's a full suit of either light or heavy armor, minus the helmet and shield. It's already enchanted (2 points to Personality and 5 points to Athletics) , so you can't add anything to it. The helmet and shield are up to you. If you try to swap out the Arena Raiment for something else during the match, you'll be disqualified and have to do it over again. If you try to swap out armor twice, you're out of the Arena.
  3. any weapon (or none) is OK. Blades, Blunts, Hand-to-Hand, Bows, Spells, Items, Potions or any combination of the above are all legal. Except for a couple of matches where your opponent has an enchanted weapon, everyone else uses standard gear, usually of the highest quality available at your level. Because you can use magic and/or poisoned weapons, that gives you the edge in equipment if you choose wisely.
  4. no looting the bodies. Your opponent's gear is strictly off-limits except for your match with the Gray Prince where you are required to collect his gear. You can keep his sword and shield and he'll usually have a few golds on him, but you'll need to turn over his Raiment.

Talk to Owyn (the Blademaster) to join. He'll give you a hard time initially, but warms up to you after a while. You'll have to choose either a Light or Heavy Raiment. The choice is yours (regardless of Owyn's comment about figuring you for a heavy armor type), so take whichever suits your skills. There are five suits of each in the cabinet next to Owyn. You can take one if you happen to leave yours behind or want to try something different. They won't repair themselves, though. If your raiment gets too badly damaged you'll either need to take it to a smith or swap it out for a new one. On the bright side, it's a cheap repair job. Once you're suited up and ready to go, tell Owyn that you're "Ready for a Match" and he'll give you your briefing and send you on your way.

Aside from the ego-thing about being Grand Champion, the Arena lets me work on some of my weaker combat skills and try out different tactics in a known environment. It's also a good fallback in case you need to add a couple of Fame points quickly.