I'll try to respond to each question.
Will the arbitrator determine not only that we owe the money, but the repayment terms as well?
No, the arbitrator usually only determines the award. Collecting it is up to the creditor and what it can either get out of you on its own (garnishments, execution on property) or what you can agree to in a payment plan.
If I do not attend, do they have the authority to garnish wages, etc?
Yes, the creditor can issue a wage garnishment to your employer, can garnish your checking account and can attach personal or real property that you own (that is lien-free), sell it and apply the proceeds to the debt. There are property exemptions that are safe from creditors, which are listed here: http://www.illinoislegaladvocate.org/index.cfm?fuseaction=home.dsp_Content&contentID=357
As I mentioned earlier, I have the ability to, and the credit union will accept a repayment plan without involving the court action...should I take preemptive steps to show that i'm willing to work with them?
Certainly contacting the creditor and trying to work something out is a good idea. You may can offer to enter into an agreed judgment for the amount due in exchange for favorable repayment terms.
And finally, because they will have attorneys there, shouldn't I have one too?
It's always best to have an attorney represent your interests in a case. But, attorneys do cost money.
If I have one, what could they possibly do to help me?
In a case like this, where there's really no defense to owing the money, and the only thing is trying to come up with a realistic repayment plan, the attorney can work with the creditor's attorney to come up with some arrangement that you can live with and afford. Often, a debtor can negotiate a deal just as well as the lawyer. It really just depends on how willing or unwilling the other party is to negotiate and settle.