I want the Monsters to fight each other in an Arena.

How would I go about doing that?

In a game I have called "Severance: Blade of Darkness" there was a mod called "Gladiator". Basically you could spawn whatever monsters you like in this ring and watch them fight, or jump in yourself and fight them both.

Is this possible?

We've got a little Ceaser on our hands lol Make a bunch of Guardians and CyberDemons fight eachother and then sick a bunch of Pinky Demons on them.

this may require some scripting..
how scripting is done is a mystery, but there are tutorials in the works that will cover this subject..

Is that like the conditions and effects on AOE2 moding? Like you can set a condition if this object meets this object and that will inturn make an effect to open a door?