Wow this is a scary conversation. I mean wow, 7 pages of flaming opinions.
So here is my two cents.
I am a gamer. I enjoy the playing the tactical parts of the game. I then enjoy the fluff. Then the models. If I have time I will slap the paint on them. I am not a good painter, but I love seeing other peoples work. Also I love the social aspect of the game of talking tactics.
My local area of gamers are a mix of painter and gamers. Some are fantastic in both aspects of the hobby. I do know a few people who have had nothing but the "pewter colored" painted army for the entire span of their hobby life. I know if I told them they would have to paint to play in an event they would simply not show up. Hence no hardcore(wm) things in my area. I might hear a small grumble if a tie was given to the guy with the painted army, but most would understand that if they knew before the came out to the event. As for having someone win simply due to their painting would not go over at all!
When we first did our WM event out here we did have a painting prize for all of our tournaments. That kinda died out over time due to only one or two people ever winning that. It was always a majority vote on one model that was played in the event. Still after the 6th time a person wins people start grumbling about why we are always paying a guy to show up. So that stopped.
Would it work better in my local area now with wyrd? I dont know. I would hope so but I really dont know. I think the main answer should be, if your running the event board cast how your doing the painting aspect of the game and see how many people show up. If you don't get a lot, change the event till you get the max number of people. Thus you have your community.
For the big con events. I think there should be a mix. Some event where it's a pull it out of the box, glue it to the base and your good to go and others where it must be super good paint jobs.
Oh wait that's what WM does.....