Let the Users Duel

So... it was late last night and I was a little disconcerted from staining my floors upstairs on a windless evening... the windows were open, but there was little air movement to blow those noxious fumes outside. I found myself fiddling away online after my wife went to bed and decided I wanted to make a Duel module so users could challenge one another to combat. The thing is, I can't decide on how to build stats and provide battles.

I'm torn between using user statistics to let users build a character with more traditional RPG statistics or let their user statistics determine the outcome of combat... so, the more active a user is on a site, the more powerful they'd be in a duel. The caveat of course is you have to have some leveling factor to make it interesting for those who haven't been around as long or who are really just there to do some fighting.

The basic game workflow is as follows:

1) Users already exist on the site or join to play.
2) Users configure their hero settings, perhaps choosing some attributes and configuring message texts. My thought here was to let user statistics provide a greater level of customization... i.e. integrate with Userpoints so users could spend x amount of points to custom name their weapon.
3) Users train against dungeon monsters.
4) Users challenge other users to duels. The default setting is an auto-accept after some time period, so if you don't respond to a challenge your character duels without you. Otherwise, you get to accept/reject the challenge and choose a few fighting elements. (One thought was to have paper-rock-scissor style rounds w/ damage being dealt by the winner or a smaller amount of damage being dealt to each person in the event of a draw.)
5) Winner gets honor and a nice win record. Loser's record gets hit, but my thoughts are you only lose honor for rejecting a duel.

Anyways... I'm interested in thoughts for determining combat. I have half a mind to integrate this on Ubercart.org where our users have been accumulating points for a year now with nothing to spend them on. This would make for a fun diversion.