The arena is a somewhat odd place. You go there and there is an endless stream of mobs to kill. Where do they come from? Nobody knows, the only hold cells are in the basement and only a couple are occupied. This isn't the biggest problem with the arena but it does contribute. I think the biggest problem with the arena is the weapon drops. That is what causes the most camping. You can often go in and find the mobs that drop nothing unoccupied while every other mob is taken. Often even the unsentient mobs will be unoccupied.
Here is the suggestion: Park an npc arena master at the plaza entrance and make people hire on to be able to fight in the arena. Have several other npc's arena supervisors inside the arena and make employees report to these for mob assignment. Then you pay people for fighting the mobs and entertaining the crowds. No drops, just a steady income or you could even just issue tickets good for theory in whichever skills you use. The endless supply of magic swords in town has got to go. Magic weapons should be hard to come by.
Now this idea is not fully fleshed and is probably unimplimentable but I think it is a good starting place for discussion.
What do you think?