I think it has some conceptual value - if many artists are saying that the ML models can't create real art and only get a mediocre rehash of existing ideas (which by definition can't be better than those ideas), then having the same artists judge whether some piece ML art actually is better than anything the traditional artists submitted kind of brings the theoretical argument down to reality.

Sure, they should be treated as separate categories of art, just as we don't include photographs in painting contests, however, that was solved by the artist promptly refusing the prize and disclosing the origin; but until this automatically dismissive attitude persists, triggering this discussion is a good thing - and I'd rather condemn the actions of the organizers, attempting to silently erase this event and pretending it didn't happen. Their jury did decide that at least in some cases an AI generated image can be better art than a "manually" taken photo, and they need to own that decision.

There's nothing wrong with just automatically dismissing AI created art in the context of a contest. We don't allow horses to enter marathons, because even though they're fast it's not for them. We don't even allow people to use performance enhancing drugs, which might be a closer comparison.

Should we "condemn" the judges of chess tournaments for not allowing live coaching and chess AIs?

My argument for condemnation was not for disallowing participation but about hiding/denying the fact that they did judge that artwork to be really good.

If the chess community would assert that computers are worse than humans as chess and couldn't ever match human play, and when someone won a chess tournament with forbidden computer assistance the judges of that tournament would instead of saying "yep, the win was due to a forbidden advantage, so we disqualified that participant" rather hide the fact and go "no, that didn't happen, obviously human reasoning won all the games", then we should absolutely condemn them for that hypocrisy.