inside specially created arenas, nothing should be changed. You still can not damage other people’s bases. You still can not be PKed at any point in time in the world, but in the arenas you would be able to kill or be killed by other players any time you both hop into it.
The walls of the arena should work the same way as the walls in a dungeon, being unclimbable unless there is a ladder. That way you can’t cheese by hopping in an out of the arena. You have to climb the ladder to get out, and they can shoot you off of the ladder with arrows.