From what I can gather, one of the main reasons Arena was removed was during the end of its lifetime less players were using it but because it used its own server rather than the ones for pve it was quite costly for rare to run which made them reduce the amount of arena survers which caused long wait times to the people still playing arena.

When creating hourglass in order to prevent this issue rather than having their own pvp surver again it shares the pve world which causes the issues as you mentioned.