Just leave it as it is. Let the PVP idiots waste all their ammo into you by killing you in a guarded city, getting your shit and their shit looted, and getting put back into square one. I took a moment to think the pvp thing over. No PVP makes the game boring for some players. Fully open pvp makes the game too negative towards new players. PVP arenas, it can be a good idea, but not really worth it. Restricted PvP or having negative effects with PVP, there's something that can be worked with. So, here's my idea.
In my time of playing tons of MMO's, why not have a pvp-point system? You kill people, you get pvp points, the more you have, the more likely a guard is to kill you on sight.
Just kill a person? Gonna wait 3 to 5 minutes before you can safely enter a guarded city, because the guards will shoot you.
Kill 50 players in a day? Name is gonna go red, Guards will not protect you at all, so another player can just run up and shoot at you and they won't get into trouble.
Killed 100 people? Goddamn you're a walking disaster, so you'll get a black name! Guards will help players kill you then, unless they're red named or black named.
In a sense... This can bring balance to the pvp-vs-pve aspects. Keeps the open pvp, but, doesn't ruin it for all players.