The general idea is fairly obvious, but I want to show the thought I've put into it anyway.
First, independent oh any of the other locations, like Ponyville or Canterlot, there'd be a whole new board, just for dueling. Inside, one user would set up the arena, and then users would challenge them until they decide who they want to duel. at that point, they fight. There can be multiple arenas and fight threads going at once, but a pony can only be in one fight thread at a time. The results of all fights are non-consequential, and have no affect on anything in the rest of the site. You can have a pony in a normal roleplay and a duel.
In the original post, you would need to describe the area in which the fight will be taking place, in a general sense. Like 'On the street by Sugarcube corner in Ponyville' or 'on the roof of a train headed to the crystal empire' Whatever they want, where ever they want, but if it's a place they make up, they're obviously going to need to be more detailed.
Also in the original post, you will need to describe your character, in a fighting sense. As in, EVERY attack type, form, and ability that they will be able to use in the fight. Nothing else can be used in the actual fight. This is for a few reasons. First, challengers will be able to tell if someone is just bragging about their overpowered OC. Second, that way you can't just keep inventing moves as you go so as not to lose. Finally, it allows challengers to make sure the fight will be fun, as in they won't send a changeling against a pony whose ability is to always kill changelings.
The challenger will have to detail their fighter in exactly the same way, for similar reasons.
Now, I've also thought about the flaws. First, fighting isn't really in spirit with the show, I know. But, it's for fun, and we know it's going to happen in other threads anyway. Second, somepony is going to have to lose. Somepony is going to have to decide, even if they don't really believe it, that they are going to lose. They don't have to know from the start, but eventually somepony will have to make that sacrifice, or this will never work out. Finally, what if for some reason this takes over the site? I don't think that's a problem, but we'll cross that bridge when we come to it.
Anyway, thoughts? Do you like the idea? No? Why? What would you change?