I like the suggestion.
Actually, I've seen chess tournaments taking place in other forums, similar to NB -if you know what I mean- and it was lot of fun.
If it's well organized, it can work smoothly, members get to know each other better through this process (unlike other contests) and generally it's a nice way to compete and pass time.
As for the awards, if it's an official contest/tournament, obviously, they should be given.
Nice one Cookie
I don't know about this, I've tried it on other forums. A lot forfeit, went inactive and it was hard to schedule the timings (f.e. X and Y have 6 hours time difference, RL issues etc.)
Also, depending on how much is participating, there'll be a lot of controversy (f.e. if everybody else except two has finished, later on both will be disqualified automatically. There'll be arguments where X claims to have been online first and sending messages, and vice-versa).
The idea is good, but you have to think more carefully on the execution. This has been done so many times, and all times have failed and lead to bad relationships...