Must ask this guys. If I'm SL 120, will I be fighting vs SL 200??? If you don't know and want to test, check out this page to see what is the SL of the guy you defeated. Don't know how many souls you get on the arena but you get 50%, 25% or 10% of the opponent's required souls to level up.
http://darksoulswiki.wikispaces.com/Stats
http://darksoulswiki.wikispaces.com/Stats