I'm in the Underdark right now and have accepted a number of challenges against the drow and some mages at the tavern. I think I've fought 3-4 mages now and I'm wondering how long this goes on and if it's worth it? Also, how can I pick up the loot the fools are leaving behind? Everytime I finish a fight, the game automatically puts me outside the ring and I can't open the gates myself. Any thoughts? Do I just ignore my challenger when fighting and pick up items while in there?

When the fight ends, the gate opens and you can walk back in and get the loot.

I think you only get the stuff they drop, nothing spectacular that I can remember, but I didn't find the fights very difficult.

I believe there are 4 or 5 mages there.

In my last run-through, there were only 3 mages. It might be based on average party level, though.

Slight clarification to Aragorn's post: When the fights end, when you've beaten all the opponents that are willing to challenge you, the gates will open and stay that way. Translation: DON'T accept a challenge unless you're sure you can beat them, because if your only Wizard dies behind that wall, you're screwed out of their equipment.