This would be cool! If you don't want to make an arena you could pick a random spot and put invis walls there and probably set it to have only gear there be wearable as for the items laying around could make it so vendors give them for so many kill points or how long you have lived or even around of mods you have killed its been a long time since i've done anything with a server so i'm not to sure how easy this would be but good luck hope to see this soon!