To eleborate on what Jobu is saying, their are 2 problems with arbitration as it currently stands. The MAJOR problem is the ability of players to cherry pick which cases go to arbitration, which allows them to always "win". Giving the owners the same ability would make the system much more neutral, as opposed to its current inflationary state.
The other problem is the lack of "hockey" knowledge of the arbitrators. Currently, they are legal people, who look pretty much entirely at the stats of a player, compare it to other players stats (and their contracts), and arive at an award. Players who do nothing but score goals get extremely well rewarded, whereas the great checker, not so much. If you get hockey guys into the arbitrator position (either people who are approved by each side or a panel of 3 arbitrators, with 1 from each side and a neutral legal type to break any deadlocks), then more reasonable player evaluations can be made, and the process can be made a bit more fair.
However, the second point is much more minor than the first, as less than 5% of cases have this as a major problem (Kristich is a great example of this problem though). Fixing the first problem is critical, and neither side as tried anything meaningfull to fix it (the players offered a token right to teams to take players to arbitration, the NHL eliminated it entirely, or limited the raise amount, etc.). I still don't think this will be a problem to get fixed once the chips are down, as the linkage issue is still the barrier to a deal. This arbitration nonsense is a side distraction, IMHO.