Well it seems like standard ettiquette to not let mods win prizes but if they're not involved in the jugding process i can't see the harm.
I trust those involved and to be honest there's a trend for the more experienced designer's to get dedicated positions within the community, it would be unfortunate to see mods disuaded or left out because of no prize winning. I know it's not all about the prize but it doesn't seem fair. Especially when they commit so much to the community in the first place. I mean, wasn't it that if a mod in the past won the competition they would recieve the title but the prize would get handed down to the mapper who's level got the next highest amount of votes? I can't remember, but i seem to recall that. It seemed appropriate enough, but i'd like to see mods motivated in the same way as the rest of us.
I can't really say much since i'm impartial on it. I do it for the challenge and to rate myself with my peers. Winning would be fantastic for my ego and i would probably be inclined to allow the prize fall to the next person, if that wasn't offencive.
I make myself out to be such a nobleman don't i?
edit: Maybe you should put another option "impartial" to the list? I dunno, but i'd put that.