Even if they did this , it would become a bore too, it sounds exciting but it isnt really.
A challenge in a stadium with everyone watching sounds like the colosseum, but how could you get everyone to watch, besides there is nothing to watch.
All that happens is a virtual army has a virtual battle with another one, the outcome is largely a foregone conclusion, its not like a real battle used to be , where luck and experience might play a part.
The first part isnt feasible either, if the armies were equal in size it would just be a technical draw, though possibly the mecahanics of the game might give one side the win, a bit like in an election when the candidaites have the same number of votes.
If the skills were different then again the outcome would be predetermined so if you were going to loose,why fight ?
How could you set your own parameters ?
Again it strikes me that the outcome would be known before hand so why fight if you cant win?
Of course the games already like that, thats why big players dont attack each other directly, mainly because they cant because they are always shielded, its much easier to attack dead towns or players much weaker.