jonnyGURU, looks like you've done some homework, that's good. Answering the phone and talking to a collector in any way shape or form is a bad idea. Nothing they promise or agree to will 'stick', as you have no documentation, and they'll try to extract any information or agreement they can from you. First thing to do is tell them (in writing) to not contact you in any way other than by us mail.
Basically, the whole 30 day dispute window is baloney. If you get a letter saying you owe something, notice that usually it says in there that if you don't dispute it within 30 days they will 'assume the debt to be valid' etc etc. They can assume anything they want, it doesn't make it more (or less) legally obligating. They can take you to court if they choose, in which case you'll have to defend yourself in court. Most companies don't bother to do so for such small sums, but they can. Either way, you won't just "end up with a judgment against you" or something, there is a whole court process (and potentially a trial) to go through before you get to that point.
The arbitration issue clouds the picture. More than likely, they have a clause in their contract that says any disputes between you and the provider have to go to the arbitrator. That's becoming a favorite of these companies and CC companies because the arbitrator is paid by them and will always rule in their favor. If that's the case, you have to go on the angle that you never agreed to any such provision, and no, sending a check does not mean you agreed to that provision.
Go read up on creditboards, there's lots of pitfalls you have to be aware of when dealing with the snakes.....