I just installed the unofficial oblivion patch and now the arena won't work. When I speak to the blademaster he keeps congratulating me on my victory and paying out each time, but offers no other dialogue, so I can't fight the next guy. The next setstage is jumping to being grand champion. Is there any way I can fix this?

You'll probably have to grab some information. Go to UESP.net and check the wiki to find out what the quest name is, then do a getstage in the console before and after talking to the blademaster. See if something was messed up before you installed the UOP.

Are you using Wrye Bash and a Bashed Patch by any chance?