So I am in the Calm Lands now, looking to capture all the fiends then play the arena. I have a lot of weapons etc.. like anyone else, but all seem to have useless abilities??? Is the main way for me to obtain special items which can then be combined with weapons to produce abilities I have not seen yet; to steal them from enemies?

Also how important is the monster arena and winning that damn Chocobo race? LOL

You can make your own weapons by stealing/bribing/finding/winning items. Check out this thread (Thread 15304) for details on the abilities and items needed.

As for the monster arena and winning the chocobo race, I'd say they are very important, or at least extremely useful. By completing the monster arena you'll earn lots of rare items and unlock monsters that drop rare items. It also helps if you want to build up your characters. Winning the chocobo race is only a must if you want Tidus' Celestial weapon fully powered up (which I highly recommend).

You can get a 0:0:0 time if you get 14 baloons and hit one bird... or you can just get 12-14 baloons and hit no birds..

I'd only got 12 balloons and hit by 0 birds...
But used a lot of time.