What do you mean with cheating?Cheating is something that harms other players, wallhacks in css or something like that.
Personally, I'm not convinced of a competition, unless there are judges who do not play the game themselves or vote for friends.
Cheating could be hacks as you mentioned. But also simply downloading the creation of another player (who knows about it or not) and present as his own creation.
I love the idea of a contest. But especially when its official, public and with a prize there are too many black sheeps out there. Aside this i can imagine that a dedicated, closed, server where the participants are building on would be a nice thing for a moderated letsplay as well. Commenting the building of other players, maybe some smaller side-contests (i.e. build xy within 30 minutes).
But as i said - its a lot of effort. Simply saying "build your favorite building and show it to us" is not enough.
And about team building.... its not a problem as long as the conditions are equal. Imagine if 2 participants want to build a house of their home town. One is building it on his own. He got limited time as the contest will end at some point and only his point of view.
The other one has 10 helpers who build either together or in shifts, having no issue with the dead line. Also you got 10 point of views. Some are more detail-builders, others do the rough building.
Nono, you must not allow this. Either its a 1vs1 or a team vs team effort. But not mixing it. Having 2 contests at the same time is also possible. One for single participants, one for team efforts.