Generally I work on the priciple of cost vs reward:
- Costs include the entry fee, plus whatever rights you sign over to the organisers for use of that image.
- Rewards can include the cash prizes, but also if they make you a nice print out of it, and the prestige and exposure you get.
I've got no problems in paying for an entry, there's one on around here that I'm going to enter this year: they want a 4-photo entry for $40 entry fee, but the first prize is $15k. For that money they can have whatever rights to reprint what they want.
Similarly, if it's a free competition, I'll enter it for no prize money, just to get some kudos and/or exposure. Depending on what rights they want to the entries will decide if I give them a decent photo, shoot one specifically, or give them a great photo I would like to use elsewhere.
In certain circumstances I'd pay a fee for no prize money, eg if it's a charity, or if it a gallery I know and trust and I really wanted the exposure (ie, if I were trying to set up a photography business, which I'm not atm)
But if they want a not-insignificant entry fee, for no decent prize, and unreasonable terms to use the entry image, forget about it.