I was a TechStars Seattle finalist this year. We applied with a product/idea that was also implemented by another company in the most recent YC batch (I also applied to that batch before TS but didn't get an interview).

To answer your last question, yes, I think it's somewhat of an indicator that you have potential. It means, at the very least, you piqued the interest of smart investors. Not getting in just means a few dozen people had better ideas, better teams and/or more traction in their minds.

Of course, being a finalist doesn't beat having a product out in the market that people are buying/using.

For me, it was a good experience doing the interview with TS staff/investors, understanding what they want, etc. I've had moderate success with bootstrapped startups–but the accelerator/angel/VC world is new to me. Knowing you were in the top 25 applications out of 600 is an ego boost for about ... a week.

Here's the deal, though ... I've shuttered that idea. Partly because I know other people now have a leg-up, partly because I'm not in a big metro where it's easier to get traction, but mostly because I'd rather do something I'm a little more passionate about (Cilantro) and experienced in. I've applied to YC again–if I don't get in, I'll still plow forward. I've already got an MVP and users. I doubt I'll apply to TS again (moving to the valley is easy for me. Seattle/Boulder, not so much).

I don't know if that answers any of your questions, but that's what I got.