Actually, I wouldn't call Scriptapalooza a scam at all. I don't know enough about the inner workings of the contest to comment one way or another about that, but just the premise of a contest charging entry fees isn't scammy. They do have to pay people to log and read all those entries, to do mailings, etc.
And honestly, it's extremely difficult to break in as a spec screenwriter-- much more difficult than trying to break in to the publishing world. Screenwriting contests are one way that new writers do break in. I can't speak for Scriptapalooza specifically, but there are several top screenwriting contests (that charge entry fees) that definitely have led to successful careers. Scriptapalooza winners and finalists have been picked up, as well-- take a look at the press releases on Moviebytes for details:
http://www.moviebytes.com/ContestDetail.cfm?ContestNumber=123
What I'm saying, in short, is that I wouldn't jump to the conclusion that all entry-fee contests are scams (it's not the same thing as paying an agent or editor to consider your work).