We've done two logos at 99designs now. I blogged about the experience in a couple of places...with the winning entry being discussed here:

http://inthebox.webmin.com/the-new-face-of-webmin

We used a prize of $500 for each logo. In both cases, it was the highest paying contest on the site when started. In the second case, a $750 contest started soon after, but it didn't seem to impact our results negatively. The cost of running a contest is $39 (it was only $30 when we first used them).