Since we're not planning to abandon the idea of a CnR server, I would suggest this DM arena thing to be some sort of server automated event, like the Decathlon. Once every in-game week, players will get a chance to join this event. If there are enough players, the event starts and lasts for 10 minutes. Players will be teleported to an isolated interior (I suggest Warehouse 1, image attached below)

They will have to kill anyone they see and after each kill their armour and health will be refilled. Dead players will keep respawning until they leave the event. The player with the most kills will win the event and will be given out a prize.