Played arena and got out of the dungeon in like 5 tries (just like Daggerfall!), got to the first town and the music is horrible, it's screeching. There's some note or instrument or something that is just torturing my speakers. The dungeon music and intro music were fine. Did anyone else get this problem and if so, what was the solution?

Are you using General MIDI (aka MPU-401) music or Soundblaster music? This can be changed by navigating to your ARENA directory and running the INSTALL program via the command line. Although Arena supports General MIDI, in my experience, all kinds of weird issues such as split-second stutters between tracks and stuck instruments occur.

If you are indeed using this emulation, I'd suggest switching to Soundblaster - it doesn't sound as great but I think that's what the game tracks are meant to be synthesized through. If you're daring, try re-saving and activating General MIDI again afterwards, assuming the Soundblaster synth fixes the errors. You could also just try entering and exiting an interior so that the music resets, see if that changes anything.

I got that in dungeons too - and changed to soundblaster from General Midi and it stopped.