Painting awards are really just a bonus, they often have no bearing in the event themselves, so I don't see why it is a problem. Whether or not it "belongs" at a tournament is really not up for debate; tradition is massively, massively against it and, frankly, a lot of BG's problems probably come from the lack of a painting requirement (I have fought guys who took models out of Simple Green and rinsed them off in the BG sink during deployment, and once faced two people who were in only their second game ever with incomplete models, and of course, the usual corner-case super-lists are all hindered by someone having to take the time to paint them).
It isn't a punishment, it is a way of rewarding the people who did the work themselves instead of relying on the services of others.
Besides...if you allow paid-for armies to rake up the painting award you are essentially ensuring the people with the most spare money who put the least effort (as far as the actual act of painting goes) will win it all the time.
I mean, if the award is literally to the person who painted the best, do you really think you deserve an award for work you didn't do (to the point where you are insinuating you would just lie for the prize)? I mean, that's the rub, I guess: is the award for the army, or the person who painted it?
I mean, hell. I'd just get rid of it entirely, if people are this adamant about winning an award and prize money for something they didn't even do it's not worth opening the can of worms every event. There is no paint req at BG events anyway. Giving it away is a waste, especially if there is a split. I mean, why worry about it, right?