Well, we should not dismiss, no. Then again, anybody can cry wolf. This is the Internet, rumors spread. So take everything, even from the media, with a grain of salt.
There is very real point where you (the sysadmin) have done what you can to secure a public server. Granted, most sysadmins seem to never reach this. But we only hear of those who have failed, not the successful admins.
If there is an exploit that you do not know about, then it is out of your direct power. All you can do is log and listen at that point (unless you feel like scouring you code and patching - assuming open source). There is always another precaution (and checking your defense is always good), but in the end you are subject to the flaws of your executing binary.
(*anonproxy assumes the role of devil's advocate*...) Hacker threats are usually worthy of some diminishing from the scale the mass media portrays them. If you remember Mitnick's trial, the nuclear-threat was an early example. Now public opinion is much more subdued, but still enlarges the hacker more than necessary.
That is not to say that these threats should be be ignored or diminished to the point where there is no threat.
There is always a threat, 24/7. Without anyone having to make one it exists. This is a reality of the Internet.
Most news articles rarely mention that defacements happen constantly. They are practically like the weather. AOL IM exploits were once news-worthy topics (the odds of being a victim were incredibly low without a static IP, broadband, etc.).
Also, the idea of a contest appeals to script kiddies. Script kiddies do not innovate, they over-emphasize and are repetitious. They wear exploits out because they are merely capable of grunt work. In fact, devising a contest for them is a fairly effective way of getting them out.
(*anonproxy assumes role as himself again*...)
You are right EC, defacement en masse is a relatively new thing and should be taken seriously. Just do not run with the news, run the with the facts (and we are a little low on these right now).
By the way, glad to have your opinion EC. (Thats why I post instead of keeping it to myself).