Oops, ramble below. Proceed with caution!
Disclaimer, I'm not at the moment a hugely regular congress player (limited as I am to county championship here, and British Championship tournaments, with the occasional travelling rapidplay or other weekender). I find it interesting that this option is now being mooted. It's sort of equivalent to pub poker, where there's often an option to enter the cash pot for the top
x places but playing in the points event itself garners little to no cost except perhaps a couple of pints.
The difference here is of course ancillary expenses and efforts, i.e hotel rooms and travel costs, and time away from work for example in many cases - I know very few people indeed who take part on the weekenders circuit as pure grinding or effort as opposed to attempts at recreation.
If I think about it with my heart on my sleeve, given that I mostly enter major tournaments (say U160), and if I take my placing in the British one as representative of my strength, I'd say that psychologically I'd find a difference between paying
£x without the chance of winning anything, and paying
£2x that would potentially be the make-or-break extra criterion which swung me between entering tournament
a or some other tournament
b at another location etc. If I enter a tournament, yes I'm going there to enjoy it, but I think the idea of potentially winning something (since even to players, this can be the delineation of prestige between 3rd and 4th say, if you've not played so well) is very ingrained into a lot of players.
Personally, I'm mostly very spiritual if I can say that, about my chess. (This sounds obtuse and very Rowson for a lettuce, but bear with.)
I'm not one of those tournament bods who goes to 5-6 weekenders a year and does his prep and work on his pet opening lines, tries to optimise his performance, and minimises financial cost. I'm more one of those bods who makes the pilgrimage to a big tournament he loves every year purely for the enjoyment as a grand holiday. That I won significant cash this summer was a great little coda to my time, but not having done so wouldn't have soured me. If I'd played horribly and won the same money I'd even have been very low about it. If by contrast I'd played some beautiful games and won nothing I'd be far happier. But this is in the perspective of a holiday as opposed to these weekenders you get, like my county championship.
If I go to my county championship say (where I switched up to the Open last year instead of remaining as one of the favourites in the Major, as our county champion put it), I go to it hoping I'll enjoy it - or more accurately; hoping I won't suffer with sleepless night(s) and showing all the technique of a banana - but also because I realistically think I'm playing well enough to finish highly. If I do come top 3 say, I would theorise that because of this ingrained idea that you win a prize (as opposed to someone who sees it more accurately; and says the tournament is a cost of
£y and any prize simply leads to a deduction in
£y, and weighs up whether he's happy with the risk) and because of my own financial state, I'd feel a significant (though not allconsuming) absence of reward or pleasure unless I'd played some amazingly strong games and pushed beyond my own boundaries, which is rare enough for anyone.
A little anecdote to make you laugh. I went to the King's Congress rapid in Newcastle back in 2005, and played in the U130 as it was then. By a stroke of luck I managed to atone for a loss and make the prizes. Before r5, two players had 4, two had 3.5, and a few had 3. As one of the guys on 3 I managed to win, doing all I could. But the two players on 4 drew, the two on 3.5 were paired apart and both lost, and I ended up coming 3=. The way the prizes were split, our two 4.5 scoring warriors were rewarded with (80+60)/2=£70, and the three people of us who shared 3rd got the grand total of
£3.50!

But the outlay to go to that tournament was so small that rather than disappoint, it simply made me laugh
I've always been frugal enough that I'll either be comfortable with the outlay for a tournament or not; regardless of prizewinning. I think the salient point is that if someone has traveled a fair distance to get to an event, is seeded in the middle or lower order, and isn't feeling especially confident; they're not going to be very likely to shell out on an offchance, because presuming this is the same sort of fella who goes to lots of these a year, he'll be budgeting as he goes. Accordingly you'll get the scenario where if someone is in doubt, they won't put into a prize pool (which may become quite tightly contested, by only say 7-8 people maybe in a section of 20-25?). You may also end up with some sporadic range of people putting in, and that leading to someone who scores only 3, or 2.5, winning a significant prize. How much would that disgruntle the cautious chap who didn't pay in but streaked to 5/5? Their choice I know, but perhaps you could modify this to account for such possibilities. You could safeguard something for whoever comes 1st (it can be reduced to the right level if they didnt pay), or make a pools dividend structure (if that isn't complex), so those who pay in have their ladder of prizes, but anyone scoring 5, 4.5 or 4 gets a little something back from their entry? That way your entry fees aren't suddenly plummetting but there remains a good range of prizes to motivate every sort of person who attends. If you found such issues after a few events you could even allow people to pay in right after their first round game at the latest, to account for potential indecision.
I'll stop there before I come out with any more nonsense tonight!