As Elvin said each fight in tournament is single fight not connected to others, so you finish 1 get reward, and then change every thing you want in you`re army/items fight next battle, etc . . . Reward is always might runes, for early 2 runes, on last couple battle you get 3.
There is no have to lvl to do tournament, just go in start fight to see how tough is it (even in real life you have some intel before getting in trouble) and load last save game if you cant win battle. Every battle is against enemy heroes with spell casting , and every is harder then last one against bigger army. Last is against allot of dragons so be prepared for it.
And what do you mean are battles fixed/randomized ? As in is every battle vs same number of enemy units ?
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