Leaf Shield's fine if you ask me.
Also, why remove health? Dueling is about surviving.
The issue with Leaf Shield is that when easy access is open to it and other powerful attacks (that cannot bypass the shield) such as Ballade Cracker or Magnet Missile that can kill relatively quickly will cause stalemates. When two players are pitted against one another they leave their shield on until one of them gets tired of waiting. One of them drops his shield and switches to a lower tier weapon(Metal Blade, for instance) to penetrate the shield and the other player, the switches to a higher tier weapon like Ballade Cracker or Magnet Missile and completely demolishes them.
That is usually when the player says "Wow, that was kinda lame." and quits out. After enough people get a taste of that mentality, you get empty servers. No one will play something that is obviously flawed.
The healing in a duel has a lot of drawbacks - besides the one Asd967 covered. It also makes lower damage weapons useless because once one of them takes even the slightest damage, they run off and sit beside a health capsule that will generally heal them faster than the opponent will damage them. So unless you're packing Top Spin, Cutter or something else to make a fatal strike, you really can't use it which really sucks because no one really wants to be limited to a handful of weapons.