Hey, just a thought... but I think it would be a great idea to fill the arena off of Unicorn Way with red and blue wisps so we could keep dueling without having to potion right away or run back to town after each fight.
I think wisps would be a better solution than to give people back full hp/mana after each fight as it allows people on the sidelines to still get first dibbs at the next fight while the previous round of people run about gathering wisps.
I also don't think this would cause people to abuse them, since the arena is pretty much out of the way for anyone who might want a cheap and easy way to fill up mana.
:? Hmm.... Since I've never gone into the Arena except for that one Quest, I personally wasn't aware of this issue. But I would go one better myself; I would have winner AND loser to get a Full Recharge of both Health and Mana, so both sides can deal with any Quests, not Healing.