Definately not freeform. I prefer a little actual competition compared to preplanned results.
I was planning on using a slightly modified and greatly simplified verson of MEGS, the system that used to be used for DC Heroes.
I envision battles going something like this...
The lithe elven maiden looked across the sands of the desert arena at the muscular barbarian before her. Her name was Megan, and not for the first time, she wondered who she had come to be here. Fortunately, not only was she skilled at magic, but she was also very quick. She hoped that her quickness would be enough to stay one step ahead of the savage man.
(Megan, the elven girl has the higher initiative so she goes first)
Hoping to end the fight before it began, Megan reached out her senses to contact the storm elementals. Just as the barbarian started to move, she brought up her hand. Jagged blue-white bolts of energy lanced out, burning the barbarians loose shirt. Unfortunately the barbarian was too quick and managed to duck beneath her magical lightning.
(Megan choses to attack with her magic stats. Unfortunately she rolled low for her attack and missed.)
With a fluid motion, the barbarian shed his ruined shirt revealing a muscular body that was bronzed from the desert sun. With the grace and power of a lion, he pounced forward. His powerful hands grabbed the slender girl by the upper arms and took her to the ground where he used his formidable strength to pin her on the sands.
(The barbarian decides to make a physical attack. He rolls high enough to succeed and Megan's resistance is reduced.)
Pinned beneath the powerful man, the elven girl could feel his body pressed against her. His muscles felt as hard as rock, his arms were as bands of iron. Desparately, she writhed as she tried to escape. She was unaware of just what feelings she caused in the barbarian as she squirmed beneath him.
(Not wanting to rely upon her physical strength to fight back. Megan fights back with her girlish charms resulting in a seduction roll. She succeed, wearing down the barbarians resistance.)
The barbarian let out a low growl as he felt the girl squirming beneath him. She was a tempting morsel. He no longer wanted to conquer her, he wanted to induldge in all the pleasures she could bring. He savagely grabbed her hair and pulled her towards him, his mouth meeting hers in a savage passionate kiss.
(Having used a physical attack last turn, the Barbarian tried a different tactic. Although not as skilled as his physical attack, the Barbarian rolled a critical success. Checking damage, it is enough to drop Megan's resistance to zero.)
Hating herself for her weakness, Megan felt the hot breath of the barbarian against her neck, then his lips were crushing her. His animal savagry was intoxicating. Despite herself, she found herself tenderly wrapping her arms around him, giving herself to him.
Having won the match, the Barbarian is granted the power to change both himself and his opponent. He decides that he is satisfied with his stats as they are, however he decides that he wants to change his race and become a minotaur. Grinning at his opponent, he decides that he likes his woman weak but passionate. He reduces her strength stat, but increases her passion stat. Instead of giving her a physical change, he imposes a mental change on her instead. "From now on, you will call me 'Master'." he commands her.
He could choose to have her fight for him for her next fight, but sometimes companionship is worth more than reputation. He chooses to have a private scene with her instead of using her as a fighter.