This area is kind of a centerpiece to the Loonyland 2 experience. Well, actually, it's completely unrelated to the experience. It has nothing to do with the plot, and is completely unnecessary to win the game. But it's a place that most people will probably come back to again and again as they level up. It is surprisingly a battle arena. You can pay money to enter different matches, which all have different enemies and fighting conditions and rules, in the hopes of winning more money. As you win matches, your Gladiator Rank goes up, which allows you to enter tougher matches. You earn XP as normal when fighting in the Arena, but the enemies don't drop any items (still unsure about money), so it's no substitute for adventuring. It's sort of the equivalent of Survival Mode in the original Loonyland, only it's built into the main game, and it isn't just one continuous run.
That's Tina in the middle, surprisingly enough. On the right is Taylor, who you might guess is the guy who sells you Parkas. He's a bit blind. Loony is standing by Tina, and there is nobody else in this picture at all. Or if there is, it's someone hidden extremely cleverly, so you'll never spot them. How could you possibly??
Areas like this in LL2 are kind of empty... the only people around are ones that are of interest to interact with. I could add Generic Villager Male and Generic Villager Female to wander around these places and spice them up, but I sort of feel like that would just make the game harder to play for the sake of looks. Do you really want to push your way through crowds to try to find the people who have quests and items? And the other issue is that if there are only 2 such villagers, it's a weird cloneworld look (a lot like the original Loonyland!), but I sure wouldn't want to put in the effort to make a bunch of different useless people! I could color swap them, but that's not too impressive either. My gut is to leave things sparse. That's how I like it. You know anybody who is there is definitely important.