In short, I'm voting for the arena for now. With complete victories, Relhiras will gain as many as four levels and a ton of gold. Massage will further increase evasion and agility. Huge agility and speed guarantee the right to the first move.
Added 3 minutes later
And even if Relhiras is killed on it, he would have died in the mansion anyway.
Also, it's possible that after Relhiras wins, Revan will say, "Well, the new leader can't be a player character, so he goes under AI control."
Just in case - this is the least of my concerns; I'm still afraid, and I'm almost sure that Relhiras will die in the arena.
Where do we end up when we save the world?