I can't really compose original stuff worth a damn, so at first glance this proposal's title set me off.
But if it's covers, I'm totally behind it. We've got some damn fine musicians on here, many of which are known for covers. I think it's a good idea.
Perhaps, should this be passed, the contests could center around a particular theme? It'd be easy enough to simply say "do a cover of Wicked Child," but there isn't much challenge in that. I'm thinking something more akin to "take Wicked Child and make it a more driving boss theme rather than a stage theme," or "here's a theme, or musical style, it's up to you to select a song which you feel best represents it, and cover it accordingly."
Requirements like that not only present more variety and challenge, but also give any entering musicians a chance to put their mettle to the test by way of mimicking well-known styles. For example, a contest whose theme is the Baroque music style that one has to convert a boss theme into. That sort of thing. While it's a given that not everyone has access to the same samples, banks, plugins, softwares, etc., and thus there will likely be limitations as to what each person could do, I think adding theme restrictions would serve to really provide a solid challenge to any participants.