If that were done, Arena would no longer be Arena, it would be some bastard child of the game it was modded from. Whether that would be a good thing would depend on the result.
I was implying that Arena should be kept fairly "as is". The few minor changes I would make would be to tweak the leveling system to ditch the XP. Use the Skills based system of the later games. I would also include more item materials, such as daedric. It would also be nice to see in-game books, etc. Arena was a little shallow in the lore department. Other than that, I'd leave it as is.
I'd just edit it slightly for continuity's sake, ya' know.
(not that I intend to take the time and effort to mod it. I don't even know how to mod it; it's so archaic.
)
IMHO, Arena would still be Arena if the XP system were dropped in favor of a superior one. It would also still be Arena if readable books with a small amount of introductory lore were added. It would be more like Arena with whipped topping and a cherry.