Yup, we end up taking the hit on art/promotion/other costs. So far the best screening process has been motivation. We haven't yet encountered someone who was motivated enough to finish a game with us and whose game was poor enough we didn't want to publish it. We help with game design and playtesting where needed as well.
The artwork can be used in versions of the game that live on different platforms, we will take a cut of any version that uses our art/music/characters.