You could test it in a certain CPU-targeting emulator if you're overall unfamiliar what performance to expect from a 386. Generally I wouldn't consider the 386 class for any 3d games beyond 1992, as that's clearly 486 territory, even for games that are cubey wolf3desque raycasters that aren't carmack-engineered.

Considering IDE controller, all you need for a 386SX is a basic ISA Multi I/O card, something like Goldstar Prime 2. To use larger HDDs install Ontrack Disk Manager. My 386SX-40 used to have a faster 6GB Quantum Fireball drive, a big step forward from 100MB Seagate it originally had.

Considering Arena, I think I played it on 386SX-40/No co-pro with 4MB ram and Trident 9000 videocard. I don't know how it should run, but it felt fine. It was a long time ago though... Why not try it yourself?

Btw, you can also try it in DOSBox. There's a program called Topbench which has a database of computer benches, adjust the cycles just below your 386SX and try Arena with that settings.

Arena will be crappy IMHO. I only tested it on my IBM 386sx/20 though (you do have double the mhz). Being a 3D DOS game it really benefits from a 486, unless you are OK with low fps/choppy movement: some people don't care some - some do.

You can use FAT32 with win3.x but there are some requirements / limitations :
a. you need to use a DOS that supports FAT32 (7.x)
b. you need to patch said DOS so that win3x can install on it
c. you forget win3x 32bit file-access (and permanent swapfile IIRC)
d. you need to patch for 3.x in order to fix a problem with directory indexes when you exit the windows session. Not crucial but nice if you don't want to see garbage instead of files after you exit windows.

You can always just create a 2nd partition with the remaining ~1.3GB and call it a day.
About setting up the HDD, it's easy: install the I/O card, connect the HDD to it, enter BIOS and setup the HDD parameters. Partition / format and you are ready to use it.

Ok, sounds easy. But when you say enter the bios, do you mean the motherboard's bios or the card's if it has one? I can enter the HDD parameters easily. Also on arena I can always adjust detail lower or higher, and its already set low. I'm getting a paradise 24 ISA VGA card in this trade. Would that make a difference in arena as far as performance and the 3d?

I mean the motherboard BIOS, it's where you enter the HDD parameters.
A speedy vga will help but don't expect miracles... you'll have to judge when you get it.

Alright. Ill post some pics when i complete my 386!