Done the quest twice At level 5 it fails to spawn the creature.
Not sure if its because I've got ECL +1 for Duergar, or another factor.
Are you sure it's failing to spawn? It does not spawn really until you are literally -inside- of the arena (within the dirt).
Yep. Stood in the middle for like four minutes, nothing showed
Same happened to me, twice. And I did not only stand there in the middle for four minutes ... I ran and ran around with my bark lags, shouted 'come down and fight', left the area and came back a few times doing the same ...