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I have decided to host a forum posting competition for skepticthinkers.com with the prize being 120 dollars. However someone warned me that that is not a good idea and I should stop the competition before it gets started. I was told that the competition doesn't generate real content and that it could drive possible members away.

*I will be continuing the competition. Never mind.
I don't think it would drive away users, but it wouldn't bring a lot of "regular" users for you either. A lot of people will just come for that contest and leave after it's over. That's just my opinion.

Ultimately it comes down to the content or features you can offer, the one time catch ($120 prize) will only last until it's over.
A lot depends on how many members you actually have posting, of those only about 10% will take part.

I've tried competitions to boost membership, it didn't work, so I would be wary of doing any more.