It seems they don't do anything except damage modifiers?
I got up to 8th arena rank today, everyone around me 6k higher and 5 7* lvl70 toons. I had hk, 88 and 86 lvl70 7* as they're the ones doing the damage. Then a lvl60odd poggle and poe, poe 3* poggle 5*. Being that poggle and poe are there for turn meter manipulation and buff, I don't care about their damage, or their health. So is there any advantage to staring these up?
I had the same thought with lobot, who I'm farming and had a second thought over because it would take forever to 7*, then thought, i want him for his pacey leadership ability, he doesn't need to do damage, and whatever his stars his damage will be incomparable to the droids anyway.
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For example, if Poggle has too few stars, he can be 1-shotted before applying his offense up. Same for Poe--yes he is there for turn meter, but it's a big bonus if he takes a while to kill. Increased damage output is also helpful, because it could mean the difference between killing someone and leaving them with a sliver of hp.
Also, if you have low-starred characters and a low power score, people may be more likely to attack you in arena.