You're right. The concept of an Arena is contradictory to that of harmony.
However, you assume this Arena is about mortals fighting mortals. Could it actually be about gods fighting gods, with those gods using mortals as tools? Gods were fighting gods from before creation (Lorkhan, Magnus, and all them. Using this analogy, you could argue that Magnus left because he saw that he was losing). It's a legit question, since I really don't really know, but I do lean toward the god vs. god idea.