The major problem I see with the "crowd judging" or people's choice style of competition is that homebrewers are having to put up a lot more of their product for sampling that they would in a more common BJCP style event. I just don't see a lot of hbers being interested in a structure where they have to sacrifice so much to gain so little. Aside from that issue, i do like the idea. I think the best system of judging would involve a mix where the crowdsourced scores get mixed, weighted or maybe just taken into partial consideration with scores from a panel of 'expert' tasters who might provide more detail feedback. But unless the prize is exceptional, I don't really see how you get past the issue of volume required of th hbers.
I agree, maybe a combination of crowd-sourced judgment, and some 'official' unofficial judges. Better yet, the official judges could be 'secret shoppers' and just mingle in the crowd. You could have a 'People's Choice' winner, and a Judges Choice, and a Grand Champion. And at least give people something to take home - a plaque, a small trophy, etc.
Another idea would be to work with a LHBS to see if they'll reimburse or subsidize the cost of ingredients to those that actually enter (for example, HBer buys ingredients, makes beer, enters, then takes his judge-signed receipt back to the LHBS for a partial refund - or maybe a discount on his next order, etc). I think that would encourage more people to join in.
FWIW, i would sign up to hand out glass after glass of a brew at my own 'booth' if i 1, didnt have to pay an entrance fee, 2, was able to get my ingredients at wholesale cost, and 3, there was a chance of some type of prize and bragging rights. I'm cheap, and like the brewing process as much as the beer it makes, and am plenty narcissistic.
EDIT: oh dude i got it- how about the grand champion prize is that the HBer gets to do a 'collaboration' brew with the brewers at the brewery, for a limited edition release. THAT, i'd sign up for