What if the arrow only grazes the target? What if it fully pierces the target (the head of the arrow passes through and ends up outside the target)? Why isn't the target disabled/penalized from having an arrow sticking out of him irrespective of the spell? Shouldn't the target take extra damage for pulling the arrow out? Especially if the arrow heads are barbed? Oh, but I think I read somewhere that barbed arrowheads have poor armor penetration, so shouldn't we factor that in too? IMO, this way lies madness.
Having it cost an action to pull out the arrow makes it too potent. Forget stupid amounts of free damage, having an enemy do nothing for a round is arguably better (unless that damage would bring the target to 0 hp). Heat metal is already a good (albeit situational) spell. There's no reason to expand its use to non-metal-using creatures.
If I were to allow the arrow to stay in then I'd let the creature pull it out using the free action item interaction every character gets once per round. However, in actuality I'd probably only let it deal damage once (when the target is hit). After that, I'd presume the arrow didn't stay in. Not exactly an ideal use of heat metal, but IMO that's not what it's intended for. There's already a 3rd level spell called Flame Arrows in EEPG, so a spell already exists for creating burning arrows.