I think if they were able to balance the skills/damage/items/etc. for ONLY the arena option, and the campaign/adventure mode kept the same values, then I feel that it would work. I'm just not sure if that would be easy to do programming-wise or not?
Yeah, but basically it's a game inside another game, and Blizzard now don't want spend a lot of money on Diablo. PvP in campaign/adventure mode is impossible, because in the next patch we will have more damage again thanks to primal items and more Paragon.
I would thinking in another game, like Lost Ark, Lineage Eternal or MU Legend if you want do PvP, Diablo doesn't seem that will have PvP in a future.