I honestly think the Arena should test players' ability to fight, rather than players' ability to invest in GB's and to predict the outcome of a badly-programmed battle simulation. I understand the apparent necessity of allowing players to use their boosts (AT & DF) to rank them in a way and to deliver prizes in a more organized way, but I think that all this does is make matters more unfair to everyone.
A good way to rank players difficulty-wise I think would be to develop an in-game program that can predict the outcome of a fight based on your attacking army vs another's Defending Army for the Arena, deliver players that have, let's say, 20%, 50% and 75% of being beaten within some range of eras and so one would have the choice of who to fight. After all, we have a lot of random chance generators (think of the one in the Soccer Event with the player-cards), I think Inno could invest in a way to actually put that in the game. As for the ages available for one to battle against, I honestly think they should be restricted to one's own top-era unit in the Arena Defending Army, so you always fight people with the same top-era units as you have (of course players could choose to put lower-era units), and also so you can choose in which era you fight. For an example, let's say you just reached the Progressive Era and you have a few independent units from the age you've won from Story Quests, not a lot, but you're full of Industrial Age military buildings and units, that way you can select 8 Industrial Age units as your Defensive Army for the Arena and so you'll always be matched against Industrial Age players, playing yourself with Industrial Age (or lower) units. Once you've got yourself a lot of Progressive Era units you can upgrade and change the army, so you face Progressive Era players now, and so on.
Having this system would imply having different rankings for different ages, like we have with the PvP Towers actually.
With that in place, a good way to battle would be now to give the player the option to battle oneself or to choose the automatic battle, that way everyone can do their very best in the Arena instead of depending of an algorithm that is very bad. Also, as I said, having the players have no Att/Def bonus would level the playing field and really test players ability to PvP instead of testing players ability to invest in FP's producing buildings and super-levelling their GB's, it's called a "PvP Arena" after all, not a "FP Micromanaging Simulator".
About the prizes I think they should be ranked as to amount of battles won, the one with the most battles won within an era gets the best prize. Of course, this system could be abusable if a very good PvP player has also a lot of money to but lots of coins to fight, they would climb up, ergo making this a test of richness more than anything else, so a fix would be to have no way to purchase these coins, you read right Inno, no purchasing of coins would be the best way to make this fair game, but of course that will not happen with corporate greed getting in the way.
All the things laid out here I think would make the PvP Arena a very well balanced test of strength and ability to command an army to victory, which, when I hear "PvP Arena" is the thing I think the feature is about.