It would be nice if the arena master teleported you back somewhere else. When my party returned to hommlet, my summoned fire elemental immediately killed the little kid standing there. I'm running a NG party with no cleric so even though I feel like I should resurrect the kid, I'm not sure that's an option. Also, for those discussing the difficulty of the undead fight: hide from undead (1st-level spell) works really well in that fight. Pre-buff hide from undead and then you can position everyone to avoid spells.
Hide from undead is an interesting option, but I just use lesser globe of invulnerability for the stinking cloud and my cleric of Pelor destroys many of the undead. For some reason only the giants seem to resist being turned or destroyed. They fall to fireballs easily enough though.
It would be better if it was left up to the player to initiate conversation with the Master after each fight - it is easy to lose valuables without being able to pick them up again in the arena, e.g. thrown spears or daggers.
That's why I engage the Hill Giants at the top of the screen, it gives me time to loot the gems and gold they carry
How do I get there? I've completed all the Nulb quests and all that's left is the Temple, so I should be well past Story Stage 3