the only problem i see with that is that other players would be a much higher level than others
Hmm, if only there was a way to filter players and place them in groups based on their level...oh wait, there is. It's what I just said.
Pretty much every game that has levels and PvP does this, a notable example is WoW, which arranges battlegroup teams in brackets for every 5 levels. So you'll never face someone more than 5 levels above you, and you'll ahve a team of people to help you anyway. Now it wouldn't be like that in an arena, but the concern you're raising is a non-issue in every sense of the word.