With the exception of Titantic Tuesday, the LW max number I've seen is 400. Why not just leave it at 400?
As far as "squatters" go, perhaps code a maximum 30 minute inactivity cycle whereby thereafter you're bounced back to the lobby.
my .02
Please (I beg of you) check arena caps at 1:00 PM EDST or 12:00 Noon CDST. There is no such thing as 400. It's stuck on 150 or 200 during European Prime Time. Your alternative is to go to Blue arena where it's 24/200 and fly 7 grids to find a fight.
Yout squatters limit would be great. By some of their own confessions, some of them sign on Orange early and go dormant allday just to get in.
ROX