I don't know, perhaps you could come to some sort of middle ground with this.
You could have the actual models in the lower seats (nearer the arena floor), but use planes for the spectators that are higher up.
It all really depends how close the camera will get to the top rows.
I appreciate that using planes throughout is good for the frame count, but I agree with PirateJohn - it looks incredibly tacky when you see the very obvious planes that some older games use (though having said that, some newer games I played recently have used this technique, and although they did a better job, it was still clearly a plane, and still looked shabby
If you have the low poly models at the front, then gradually make them lower and lower, until you get planes at the very top.
That's my two pennies worth, anyhow
Tristan