Mark, I totally agree with you. Playing for money seems weird to me, and paying to get trashed by someone obviously better than you are seems like a sucker's deal.
You probably got this already, but earlier this year I was trying to set up a tournament for June. Basically, I got really busy at school and bugged out of it after most of the groundwork was laid out. I spent a lot of time thinking about it, and talked with friends who were either regulars or have run tournaments before. I was trying to come up with a logical way not to have to charge entry (except, perhaps, the house fee,) because one of the two primary goals was to get new people into our group. The arguments for an entry fee and cash prizes won me over, even though I would have prefered them not to.
I'm sure you've played a lot more games competitively than I have, and are used to paid and free tournaments. You say you'd prefer no entry-fee for "this" game (I'm guessing you mean SCIV, not BB,) but there's one reason I think it's necessary. Feel free to challenge this statement if you feel it's wrong, but this is what several people led me to believe: lapsed hardcore players, and out-of-area serious players, are more likely to show up for a tournament if there are "stakes". The main argument for keeping the tournament free is to make it accessible and inviting to casual local players, especially since as a community we're small-time; our group isn't huge, and SCIV is waning in popularity since so many fighting games have been released since last July (SF4 chief among them.) This benefit has to be weighed against the hype/interest generated by attracting stronger players to show up and provide exciting semis and finals, as well as generating consciousness of our tournament beyond our town.
I don't have any delusions of building these up to a huge turnout, but if we can improve the chances of drawing in already experienced players, not to mention maybe getting some folks from Portland/BC/NorCal to show up, we should encourage that. I think there's a golden mean here, where we can establish a level of seriousness and "professionalism" by charging entry (actually, potentially having funds to work with helps us out on the back-end, too, even for silly things like memory units,) while also keeping the "dollars/hours-of-entertainment" ratio low. The magic number I came up with was "under $10 dollars" if someone wants to enter just one event - there are local tournaments (held at places like Gameclucks in Lynnwood) where just the venue fee is $10, with an additional $10 per event. Maybe this works well for a high turnout Marvel/3S/CvS crowd running on lots of screens. That, for us, would seem ridiculous. For that amount, you could take your girlfriend/boyfriend out to dinner and a movie. At ten bucks, the equivalent is squeezing yourself into a matinee with no popcorn or drinks. I think the figure works.
Anyway, I'm just doing a brain-dump here so we can get this out and discuss it. If you guys agree/disagree, shout it out and we'll hammer out something that works.
Unfortunately, I've still got work I need to finish. I'll try to swing by tonight so that we can have that conversation about August 15th, but I don't think I'll have the time to stay and play much this week. Seeya guys!