If you want to think about it...
It feels a great deal like how cowpox was used to innoculate people against the much deadlier/contagious smallpox, to be honest.
However, I agree that there are some short-sightness in the planning of the contest. The most obvious point is the "review" process--surely a seperate, vetted team working with the AV firms would be a better, if more expensive way to slipstream the results?
Also, physical security would be a huge help--provide computers without any data devices installed (such as CD burners, floppies, and USB ports,) and do a thourough check in and out of the contestants for any "outside material."
Lastly, making your own malware is obviously not the best idea, so... why not simply strongly reccomend polishing up their anti-malware skills instead? The fact that you can crack a virus isn't at all that dissimilar to writing your own. (The main difference between black hats and white hats--and greys in between--is that the blacks don't care about cracking viruses, only modifying them.)
Under these conditions instead, then... let the games begin.
Biting the hand that feeds IT
