Yep, just start over. If you had a decent number of guys at gear 9/10 or so it might be worth sticking it out, but you'll end up getting back to your current level of progression in no time, without the colossal disadvantage in arena.
The generally accepted best progression path is to farm Phoenix Squad first, then go for Emperor Palpatine and Grand Admiral Thrawn for an Empire team, followed by R2D2 and Commander Luke.
After that you've got a lot of options these days, though personally Jedi Knight Revan is probably the next team I'd work on after that. He isn't the king of arena anymore, but his team can squash just about anything other than an equally-geared Darth Revan/Malak team, and does well in raids to boot. Also, if you go this route you'll end up getting four decent-to-excellent Jedi (Ezra, Kanan, Bastila, & Jolee), so toss in one more and you can also get Grandmaster Yoda easily.