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What level would everyone recommend to reach before tackling, the Fortress of Ice? I am currently level 10 Knight, with an elvish two handed Axe.

If that's the one I'm thinking it is, you can try it at your current level, but be sure to save often and rest where possible to restore your health and repair your gear. I don't recall what level I was at when I tackled it, but I went through the main quest pretty quickly without going on a lot of side quests along the way to build up my stats, so I doubt I was at a very high level. The main problem I had was learning how to deal with the ice wolves or whatever they're called, because they can blast you from a distance. Once you figure out where they are, you can try to sneak up to them, then run at them and attack before they blast you from a distance. The knights are also pretty tough.

As long as you have items or potions of restore health and potions of resist frost you should actually be okay.Knights are very good class in this game for many reasons.
What race did you pick?

I would recommend always having Enchanted Healing Items\Potions on hand as well as potions of resist for all three elements as well as Shield.

One thing I found out the hard way about Knights is that it takes time for them to repair their gear, so if you have any pieces of gear that get worn down excessively through heavy usage then you'll need to stop and rest for a long time. This can be especially important if you have some pieces of magical gear that you rely on for some nice spells, since the number of charges remaining is another thing to keep an eye on. It's a good idea to make a note of the maximum number of charges each item can hold so that when you're resting you can tell if each item is back to full strength yet.

I'm not sure why, but I tend to use potions only when necessary-- not just in Arena, but in any RPG. For one thing, I don't like to have to carry around a lot of extra items such as potions or scrolls. I'd rather have a rechargeable magical item (weapon, armor, jewelry, etc.) that can be used to cast a healing spell, or better yet a magical weapon with vampiric qualities ("life steal" or whatever it's called), because that way not only do I heal myself but I deal damage to an enemy at the same time.

EDIT: Anyway, when dealing with enemies that can hit you with ranged attacks-- be they spells or arrows (or worse, magical arrows)-- it can be critical to run up to them as quickly as possible and get in some good hits before they wipe you out. Well, if you're using ranged attacks as well then that can help, but it's still important that you react quickly and start scoring some hits before you get wiped out. If I remember correctly the Fortress of Ice was the first dungeon in the main quest where I found that to be especially true.

I've made it through the Fortress of Ice. It was pretty close on the way back i only had the smallest bit of health to get back towards the exit. Cheers for the advice SeaGtGruff and Maxrebo. I'll make sure to keep my gear up to scratch. Maxrebo I picked Nord as my race. I'll definitely look into getting rechargeable magical items SeaGtGruff. Currently playing through the Labyrinthian 2nd level!!!

Congratulations on surviving the Ice Fortress by the skin of your teeth!

Magical items are really expensive to buy in the stores that sell them-- which I suppose is an argument in favor of potions and things-- but you do find them in the wild sometimes. The only negative is that you must get them identified at the Mages Guild before you can use their spells, although magical items that add points to your stats will do so whether you've gotten them identified or not. And not all blue items have spells, because some blue items are just special weapons or armor-- elven or dwarven or whatever. So sometimes you can "identify" an item yourself by noting whether it improves any of your stats or what its damage/protection rating is, although you still need to pay a mage to identify it for you for real.