I spent a bunch of time on the archery range to get some $$$.
Then I went to the arena and did a bunch of matches. Most of 'em I lost. The last one I lost, but I found myself outside the area with the sword master telling me what an “arse” I was. But the sword combat icon (5-point star) was still on and I could only move left or right (combat moves). I could jump into inventory but when I returned I was still in pseudo combat mode. Ditto for hitting escape.
I finally managed to escape from pseudo combat purgatory by crouching “C” command and standing up again (a relief because my Henry was starting to build up some useful skills/levels).
The arena fight preceding this was “beginner” level and lasted for a bit ending with a “you’re finished”. It was at night. Nothing unusual about the fight itself. The graphics displayed when I was stuck in “pseudo combat” was some kind of loop move a little right, move back left, repeat…