I think it would be fine if they had an option to toggle on/off if you want to receive requests for dueling. If you have it toggled off then you wouldnt have the option to be asked for a duel.

As far as balancing is concerned they could make it so that once you both accept the duel then your skills and stats would change to dueling skills and stats somewhat like they do in the wolves den. They would obviously have to rework them somewhat like give whm more int or something, it may take some time to balance things fairly but I think it would be do-able. Once the duel was over you would go back to your normal stats and skills.

I think this would make open world more fun, maybe someone would be like the black knight and guard a bridge and not let anyone pass unless they fight. And if you dont want to participate then you can have dueling turned off and simply run by the person just like it is now.