the Arena fight with Draco feels like it might be more fitting as a pure story event and not gameplay. But one idea for improving it would be to keep it uniform with the other fights in the game. I also think it would be a good example fight to so the player what fighting against someone with a Spiritualized/Liberated weapon is like (though I think you might have had it mind that Draco/Drago was intentionally holding back?). I see it like the player has access to Wound Mend at the start, but the first attack Draco uses drains the player's MP and does takes 1/3 of their health, then he does 2 more special attacks after that, also showing them off. I don't know if you play on Welt facing him in combat again, but it would be cool to get a preview of his abilities like that.
One thing I'm wondering is if all the player's friends/wards/companions are going to have similar tasks and quests like the one Welt and Anastasia go on?