Respawning monsters never made much sense to me, tbh. If you kill off the entire population of something in an area, then it just doesn't magically respawn a few days later.
That being said, the example given earlier with a beehive does make some sense, but in this game random encounters would grind the game pace to a halt. At least if the encounters are to be challenging, and if they aren't, then what's the point in having them in the game?
Sure, for story, it would be cool if there were enemies that moved into areas that you had already cleared, but only if it made sense. However, those encounters would have to be as well thought out as the current encounters, meaning they'd have to be handcrafted.
Also, I'm not sure I'm a huge fan of that whole arena idea. But maybe that's just because I've never been the type of player that wants to minmax my builds, so to be able to quickly try out a ton of builds doesn't really appeal to me. I want to play and be challenged, I don't want to play and roflstomp everything from the first level.
Anyway, that's just my poorly thought out 5 cents.