I prefer the idea of using the award system, as well. Rep points are a neat idea, but, in reality, only the recipient will really know that it's a prize garnered through SOTM competitions. An award would show up with a description on each post, as well as on the Awards page.
EDIT - I moved this thread from the Open Beta Suggestions section to the other Suggestions section, as the former is really supposed to be for suggestions pertaining to subsequent open beta releases.
An award and a small credit amount would be nice for any competitions (not limited to the SOTM competition only.) But there must be more stuff that you can do with your credits. It's not interesting to be able to only use them in the arcade.