It's a really great idea about a community driven game engine!
We need 3-4 motivated people for this I think.

This obviously can help to solve the issues with user activity and content.

Concerning competitions, at the moment I'd prefer a themed and short one.
Prizes can be something like a permanent rank in the community, E.g. "winner of 120-th annual competition".
Probably judging by other competitors is simplier to organize.