Hate to be the naysayer here, but I have to say I think this is a bad idea for several reasons:
1 - it's only good for dueling classes (seriously, who cares if you win a dueling contest for builders)
2 - Some of the best threads in the forum are the best duelers in the game talking down to each other (like the BCS system, it leaves you completely unsatisfied and yet it makes for the best football discussions ever)
3 - it doesn't do justice to the different types of duel builds, i.e. regular vs. resistance, since I would think that endurance would be a necessary part of the tourny and there's no way the mid and lower levels are gonna make it more than a few rounds unless they're resistance, unless you start off each round with your health topped off, and then that would defeat the purpose of the endurance aspect which is the only way I can envision a true resistance dueler winning.
4 - Who would end up being the challenger? Having a better tactic or appear would certainly determine whether I was going to challenge someone or not. So the soldier would lose their tactic benefit if challenging?
5 - You would ultimately lose many of your best duelers because once your at the top and there's nothing left to do then what? I'll tell you what, you leave.
Now, not to leave you guys empty handed, may I suggest something a bit more practical. How bout card tournys instead, bring your own money (items too?)