There's still lots of socialization, but I believe hackathons should be centered around code, otherwise you might as well just call it a foursquare mixer. There were lots of really cool apps built at the iOS hackathon -- I'm really glad it was so hacker-centric, however the prizes were significant. Paypal gave away 3 iPads to winners that night.
Also, if the goal is to get people learning about the foursquare API -- the only way people will learn is by practicing. I learned a lot from others at the iOS hackathon -- even stuff I thought I already knew well. I think foursquare would get a lot more mileage if they just added a few small prizes to fuel competition.
Some of my friends are marathon runners -- they say that if the city sponsoring the running event offers no prizes, almost no professional runners will show up, but if the city offered a $100 small prize, there will be a significant amount of pro athletes attending. Does foursquare want pro hackers attending, or do they just want scavengers who are attending for the free food?