How about, instead of typing out a scenario or writing captions, the entrants actually make a short in-game video including the BGs, sprites and inventory items? The 'videos' could also be semi-playable, with the player choosing dialogue options, etc...
Then the winner of each competition supplies the images for the next competition (either draws them or takes them from a game somehow).
Edit: Dang Nipper got in before me, but hey.
Then the winner of each competition supplies the images for the next competition (either draws them or takes them from a game somehow).
Edit: Dang Nipper got in before me, but hey.