Well, something that interested me about the pass/fail system used in the 12 labors was that while there was one "true" winner, it was possible for everyone who participated to pass a threshold and get some form of recognition for it. I don't think you need to write scathing reviews to do something like that.

The problem with a point system is that, for me, I don't really believe it's realalistic. I can tell you if I like a piece more than another, but telling the difference can be really hard. especially when asked to consider personal biases. (I like anime stories, and this is an anime story, but I do feel that it's written better. do I give it to the other guy, or do I go with my feelings?) If you did have a point system, you would need to really break it down so that there was some meaning. 

I really think the best thing to do is get some judges and work with them on a system you agree on. Decide what you're looking for in writing and make sure the contestants know it. Are you looking for good grammar? Make sure everyone's good at finding mistakes. Is it for how clearly understood a prose is, or are you looking for more artistic approaches? There are a lot of ways to write good stories, but that doesn't mean all of them will win your contest.