The last boss of the Demo is a monster called Mercy, which Mercen-X requested, and it's not a KH/Squenix monster. As for the last boss of the game, I don't know because I'm making it up as I go along. However it might be Guard Armour or a member of the Organization.

The battle arena sounds good.

I doubt it'd be that hard to implement either. Infact I might start work on it right now.