Here is Celandro version: http://www.1x4x9.info/posted/ArenaMaster2.zip

As soon as you enter combat in arena it displays a message "you cant raid target enemy players", you have a few seconds at the start to do it.

As in, you have a few seconds at the start when you first zone in, or before you enter combat.

to fix the message something like this should work:
if (InCombatLockdown() ~= nil)
return

You don't need the ~= nil part.

if( InCombatLockdown() ) then return end

This is what happens when you are coding in java and try and theorycraft some lua code on your break at work..

It's worst trying to go from using "then" and "end" rather then { and } =(

function ArenaMaster:setIcon()
-- return if we are locked down
if( InCombatLockdown() ) then return end
-- return if there is already a mouseover set
...