You can dodge magic, depending on your timing and distance from the caster. IIRC arrows are harder to dodge, or they just do less damage so I wasn't too worried about trying. Either can be blocked if you move behind a tree or rock, etc. Your creature (with a ranger or mage head) can also make a decent shield, depending on the number and distribution of opponents.
I believe with the 1.03 patch/release lowering the difficulty setting lessens the homing effect for opponents (I assume your own arrows and magic remain the same).
