The thing is it would only be interesting if we can recognize a ex-guild member, like after 30 matches played with a new guild.
With even more content, like equipment, skills, "personality", "traits", voices, and maybe listing the names of the fighters in some way, we potentially could really recognize an old friend at the start of a match, and this could feel different.
I really like the pool of mercenaries mechanic, you talk about. I have a feeling that the arena is going to be as immersive as the main game at some point
There would have to be a new one generated of the same rank the one you killed and random gear/skills, in order to maintain a pool maybe.
The "spare or finish off" thing could be great, but would be something that happens in particular conditions, maybe special matches like tournaments ? Or with character having a really strong relationship only, good or bad ?
With everyone it would break the pace of fights.
How would it work ? If you win the fight without killing the opponent, just lowering his stamina to 0, he would have a chance to remain conscious.
Would either just curse/beg you, just writhe in pain or just silently stare at you, claps and congratulates you, laugh... maybe a potential audience could also influence you "Kill the pigface!" "Boooo"...
And you can just ignore that, finish him off or salute... etc; and continue...
Now all of this sounds like tons of work and far to be in the next top 100 things to do lol.