1 : The invisible walls. Possibly, seen it done before. Even though we'd have to be careful with the freedom of the arena (aka snap and highjump issues due to the walls) + possible bug spots like our current PvP arena has (Specially with arrow repel and smite, you can get stuck out of the arena or inside the wall atm).
2 : best out of 3 bracket is fine :3.
3 : Prices are fine as well.
4 : Just 1 gear set.. I'm not sure. Some classes will benefit from this way more than others.