I don't think it has anything to do with the prize, interest, or inversly the lack there of in the challenges so much as has been mentioned, its just gotten rather quiet [and that's an understatement] around here.
Back when 100 or 200 people went thru here a day, if 10% entered the challenge, that's 10 to 20 people right there, now you've only got 10 people that visit the site daily, well, that's only one person to participate in the challenge.
It seems, tho I hate to say it, and can't back it up with fact, that LightWave as an app may also be in a bit of a down swing, the v[7]/v[8] life cycles, v[8] in particular didn't seem to live up to what they were supposed to, and some of the user base may have jumped ship. Now with v[9] and all that its shown thus far and promises its making, perhaps that could turn as well.
I think the best thing might be to get the regulars posting as much as possible, and hope to catch the people like myself who tend to breeze thru. Ride the storm out I guess, is all I can offer.
I'm not sure how you'd spread the word more; If you look for LW tutorials on the web, you'll wind up here in pretty short order as it is.
There is a certain ebb and flow to the web tho, some sites take off, and then stall for awhile, then flourish again; I can't say I was around for the "hey-day" of SL, but this may well just be the stall, and that a pick up in activity is just around the corner.
As a drastic measure, and logistical nightmare, you could look at getting some sort of community project started, get the regulars to spread the word to some of the other sites that you're going to be starting something and are looking for people to join. Then as its worked on, just keep "spamming" it elsewhere, like updating a project thread on other sites, small updates, just something to entice people, whilst keeping the majority of the updates here. Could improve traffic and might jump-start things around here, tho like I said, it can be a logistical nightmare, and requires a really solid leadership core to even begin to be a workable possibilty.
As for my personal involvement, or rather lack there of in the last challenge, as I failed miserably to even come close to completing my entry. I got tied up on one big project for most of the time [tho its on hiatus now due to computer problems], even with that project, I still intended to make a push in the last week or so of the challenge, but found myself instead spending forever trying figure out what the problem with my computer was and what had to be done to get that sorted out. I do feel like a bit of a jerk as spam-bots posted more on my WIP than I did, and hope to get a WIP going in the regular forum, as soon as I get a chance. Hopefully redeem myself a bit and save some face.
...and I got carried away, sorry, I know none of you want to read all that. This is what happens when you don't post often enough, it gets all pent up.