Why is it a terrible idea? They should just put stipulations of how it can be redeemed (like all at once) and an expiration date to use them, the winner says how they want to redeem it, and the owner of the points books the flights (or hotel) for them. It's just like all these "2 tickets to Israel" prizes except this can be used for one 1 business class seat to Israel or 10 cheap flights on JetBlue. We've had a 5 night Hilton stay (anywhere in the world) as a main prize of our auction (and also did a DDMS ad) and it did well and wasn't hard to arrange at all.
Also you'd be shocked how people choose to redeem these prizes and it's not in a way to maximize their value...most prize winners aren't savvy DDFers.
This is exactly my point, since the majority of people aren't going to be able to know what to do with them, let alone maximize the value, it seems like a waste of money to me. Sure someone with the knowledge can maximize the value but said person can also take $1500 cash and buy the miles if they wanted. A 5 night hilton stay anywhere in the world is a lot easier to deal with, the winner picks a hotel and, based in availability, you book it for then, pretty simple. Having MR as a prize is not the same thing.