I've expressed concern that arena will be a dead feature that nobody plays (kind of like XCOM2). I really, really hope not, but I've got some ideas to avoid that.

1. Global chat from arena lobby. Some way to alert people that are playing divinity that an arena lobby is available would be really nice.

2. Integrate the existing arena of the chosen beneath the starting fort into the multiplayer arena. Have one of the NPCs down there link directly to online arena matches. "If you want to fight other chosen for glory and treasure, you have come to the right place". Having underground arenas in each major city/quest node that all link to online arena lobbies would be really cool.

3. Arena 'invite' lists. Sign up to queue for arenas. Once a match is ready (enough people have queued) you can get alerted while in singleplayer/game master mode and be prompted to join if you're ready. Your session will automatically save where you are and then drop you into the arena lobby.

4. Daily rewards for participating in an arena match. This is a simple, but effective technique that a lot of game deploy. Minor rewards are a great way to get people involved in modes they may never try or bother with otherwise.

5. A ladder / career profile. Some kind of progression system would help keep people interested. Earn special cosmetic gear or stuff like that.

Finally, in terms of arena balance at large, it feels like it's super imbalanced and characters die in 1-2 hits. A warrior who rages can actually one shot people. Also, you should not get vision of enemy players when they are out of line of sight or taking their own turns. Your camera should be fixed on only your own units during that time. Stealth is really bad currently because you can see the exact movements of the enemy due to camera panning, and can also see their dot on the mini-map.

In response to your concerns, I believe that arena will become rather popular if they merely implement a decent AI and also allow people to fully customize their characters. But to address your suggestions,

#1 is an awesome suggestion. +1

#2 is really interesting, and could be pretty cool.

#3 sounds like it would work really well. Another awesome suggestion.

#4, how are you going to implement this? What rewards? I don't think this would work very well, since there'd be nothing to reward that wouldn't affect performance, besides maybe a little cosmetic badge like Evolve has.

#5 is amazing. Yes. All my yes. This would be so huge.

And as for balance, I believe it is supposed to be highly lethal, and this is early access anyways, so I wouldn't worry about it too much. Once we're able to customize our characters, we should be seeing more survivable units, and they'll probably nerf weapon damages anyways. Hopefully they nerf armor too, and leave us with long matches that are played out with limited resources like armor kept in mind.

My biggest problem with arena after a few matches is actually that damage is insanely overtuned. Just comparing the fortify/frost armor spells to damage is eye-opening enough.

1 AP to apply 100 magic armor. 1 AP to cast hail strike and remove all of it, do an additional 200 damage and also freeze the target. With the new system of how CC is applied, the frost armor/fortify spells need to be more effective. Especially with how high damage is, armor just gets stripped away instantly.

It all really comes down to damage for me, which I know will change a lot before official release so I didn't rant about it in the OP - but it's so high right now that arena doesn't feel fun to play. The winner is whoever has a better starting position

which brings me to a valid suggestion

*You should be able to select which position your units start in. When my warrior is on high ground and my mage is on low ground, while my opponents warrior is on low ground and mage is in high ground, that makes me sad.

Another great suggestion. Nice thinking, man. I like your style.