How about instead of insta-reviving when the respawn timer runs down, you have to press a button to revive (not the 2CE one)? You know what it's ramifications are.

Well, not giving you a token for not getting a kill kinda defeats the whole "King Krogmo presents you with the Krogmo Coin for participating" thing. And it is a little harsh, too. We all have our bad rounds.
I do like the idea of a manual spawn button, though.

I vote for timing out afkers after, oh, 30 seconds

This is a difficult problem and not one that can be easily solved.
On one hand, players who AFK should have legitimate reason to, otherwise it's just annoying.

Perhaps there could be a vote out function? If a player is annoying other players, then he/she could be voted out.

When starting a game, you could join a friends team, which like the clockworks, the party can be specifically locked. So AFKers will only annoy people if they join random games of unlocked parties, which they can be voted out of.

Critique my solution anyone?

How about they fix the insane lag that way arena is actually fun to play not a mindless grind for recipes?

I loved bomberman on SNES, but the lag makes arena an unpleasant experience; snapping back after dropping a bomb, walking for 5 seconds then popping halfway across the map because someone dropped a bomb that didn't show up on the screen, dying because appearing behind a wall on your screen doesn't really mean your all the way behind a wall, and a few dozen other complaints you can come up with after a single match.

What confuses me is why such a small contained match is so laggy. Its a simple map that takes up a screen, with say 25 non-destructible pieces of terrain and 25 that are destructible and 4-8 sprites dancing around dropping bombs. There is less lag in FSC and those maps are giant and have quite more going on.

So the solution to your afk problem is this: Fix lag thus making arena fun, or don't make recipes only purchasable with coins.