My understanding:

The fee is nominal, calculated mainly to filter the applicant pool for commitment. Since it's a nights-and-weekends program and wasn't as well-known before, it was vulnerable to people approaching it more casually than they would something fulltime like YC.

Their profile is growing though, and I imagine the formula will keep evolving (Foodspotting, Spoondate are two alum projects with buzz right now, more still building steam).

As for how it affected general vibe, no one in our session seemed to treat it as something they had paid for with the fee, but more as something to contribute to and earn by making success happen.