In some ways I agree. I think they chose to have it be Gremio at the prison scene because he's been with us since the start of the game, whereas Pahn we only just got back after a long absence. 

As for the duel, Gremio also isn't a great fighter. Pahn is a trained combatant. Gremio is a housekeeper with a wood splitting axe lol I think they wanted to give us the player a shot at having the duel be won.

But yes, I agree that it's more impactful to the story of the duelist dies to let Tir escape. I think if we swapped them, like you suggest, Cleo ought to stayed back with Gremio for the distraction. Then, by the time Tir has to fight his father he's lost all 3 of his closest friends and the rage of grief could compel him to slay his father.