Now that I've played the game a bit more, I'd like to add more information: Whenever a text box appears announcing something, wheter it be "you have rested" or "you've gained a level" or anything, the game slows down like heck. With this I also tried adding more CPU cycles to make the game run smoother, but it didn't work. Everything runs smoothly except the weapon sound effect and all sounds produced during a text box appearance. I read online that using too much CPU cycles could cause stuttering audio, but whenever I try to lower the cycles the game just slows down into unplayable speed and it doesn't effect the audio stuttering and pops at all.

Try changing the soundcard configuration for the game to Soundblaster Pro.

Tried changing sb16 to sbpro1 and it got rid of most of pops and clicks but the weapon sound effect popping (both me hitting and the enemies aswell) still remained. Makes me wonder if it's something actually in the game sound files. I can't seem to get rid of it. Good news is that I found out what was causing the audio lag pops with the text boxes: In [sdl] I changed output=surface to output=opengl and it got rid of all the lag and lag-caused audio problems. Now the game runs smooth as butter.

One other thing to check is that you haven't re-aligned the general Mixer rate, by setting something like...

[mixer]
rate=96000

...I had noticed that doing so causes clicking in some games, likely related to 96000 not being an even multiple of 44100/22050.

This question likely belongs elsewhere, but would setting it to an even multiple (i.e. 98200) work/correct for the clicking/popping I was hearing?

This may not be the answer you want but it works. There is a preconfigured arena cd and dosbox 074 at uesp.net and it doesn't have that problem. There is also a guide to running area with dosbox on newer computers. Hope this helps!

One other thing to check is that you haven't re-aligned the general Mixer rate, by setting something like... […]
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One other thing to check is that you haven't re-aligned the general Mixer rate, by setting something like...

[mixer]
rate=96000

...I had noticed that doing so causes clicking in some games, likely related to 96000 not being an even multiple of 44100/22050.

This question likely belongs elsewhere, but would setting it to an even multiple (i.e. 98200) work/correct for the clicking/popping I was hearing?

Nope, didn't touch the mixer settings. It's at 22050 Hz. Here's what's in the
config file

nosound=false
rate=22050
blocksize=2048
prebuffer=10

That reminds me: does blocksize or prebuffer affect this kind of things? I tried playing around with those just for the heck of it but it just ended up screwing up the game so that it became uplayable. =P

This may not be the answer you want but it works. There is a preconfigured arena cd and dosbox 074 at uesp.net and it doesn't have that problem. There is also a guide to running area with dosbox on newer computers. Hope this helps!

I am, actually, using the (most likely) very same version you are talking about, Stigm. The one I have is the CD version 1.07 that has a proper windows installer and comes with a preconfigured DosBox version 0.74, which is what I'm using the play this game. Here's the link where I downloaded this http://theelderscrolls.wiwiland.net/?title=Ar … :_ArenaSetup_EN.

Yeah looks to be the same one I got just at another site. I unfortunately have no idea why your having the problem. Must be computer specific. I hope one of the experts here can help you.