Wouldn't they just hack and cheat then, too?
No, because the arena matches would be monitored and enjoy the special attention of the deveopers. Cheating and winning the fight doesn't help you anything if you get permabanned a week later again.
I think to make this a real spectacle, the weapons should be adjusted, to total retardedness weapons. You know, weapons which deal 75blunt damage but have speed 30 or the like. And they all look like dildos, baguettes or fish. And the armour look like pandas, strippers or clowns.
Dying shouldn't mean you lose your account. The audience decides: thumbs (blocks) up means freedom, thumbs (block) down means character deletion. We need to keep things fair.
We can also make different game modes. The "deathmatch" mode is only one possible mode. We can have different teams or convicts fighting each other, or a convict team fighting a veteran player team (like in Gladiator, the "Battle of Carthage"), we can have one or more badly equipped cheaters fighting one well equipped veteran player, or even the developers fighting them with their fire staffs or something like Lions or the like (basically a horse with lion skin making the rider invisible an dealing 50c cutting damage on bump).
Great idea!