Any average will be subject to arbitrage opportunities surely as it necessarily differs from prices being averaged. Or was that not the point? If transaction cost is low enough then one can continuously buy and sell and the only limit to profit would be the transaction rate (and holdings of those buying/selling the coin).

I've gone back and forth on this. Current plan is to use Oracalize.

http://www.oraclize.it/

I might also suggest pulling from as many exchanges as possible and applying something like an average function to them. Of course you need to make sure that doesn’t cause the contract to be even more vulnerable due to outliers spiking the average.

The oraclize query will get data from cryptocompare.com, which is an aggregate.