Of course, if you want to have a G0DLY F3LLBL4D3 in the arenas, sure you can! EARN it and exchange for that weapon model with one million faction points or something.
Come think of it... this can ONLY be good.
1) It totally destroys the notion of "OMFG!!! GODLY 'PERFECT' WEAPON". How do you know something is perfect? 15-22 sword? Oh wait, someone else has a 55-110 sword for sale.
2) Game balance is STILL preserved, with arena standard items. I think the idea of standard competitive weapons and mods are perfectly valid.. you don't see people racing with jet mounted rally cars in a race don't you? Even though such cars do exist elsewhere in the world!
Arenas have rules. The rules should include the tools you use.
3) Of course, great diversity, what more can I say?
4) If you see someone with a Fellblade or Chaos Axe or what have you in the arenas, you can tell he is truly a worthy opponent rather than just some silly ebayer who really needs to reassess his/her life.
Of course, the downside to it is people can go out with their "godly" items and totally decimate whole populations of mobs

But hey! Who doesn't like that feeling of being powerful? Besides Anet can tweak their item drop algoritms a little and allow for people to actually let their hair down at the end of the day and just have some fun!