if i started a $100 for the best banner contest...
 

but added:

Even if you dont win, by posting you allow me to use your banner


would people still enter the contest?

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I wouldn't. But I might if you offered to pay a small fee of $5 or $10 or so for each one that you decided to use that didn't win first place. If I had time, that is. :)

I will enter such a contest!