It's always interesting to see music business posts on places like TechCrunch, since tech writers approach so many things with a community-oriented, "Web 2.0" perspective.
The issue with Music Nation isn't that it's necessarily a ripoff, or that anyone there is being disingenuous. Marshall Kirkpatrick from TechCrunch expects to see "cringing and backlash" from the music community -- and there will be. Just, not in the places where it will make any difference to the musicians that will pay $25 to sign up for this battle of the bands.
Music competitions are actually pretty easy promotions, because there is always going to be a wave of folks who are willing to drop some money to become a star. (If you're reading spinme.com, or hanging out at the CD Baby or JPF boards, you know that it takes a lot more than just a recording contract to really make it as a working musicians.) That huge chasm between the folks that know how to make a living making music and the folks that just want to be famous is something that, I fear, no amount of community knowledge is ever going to change. All you can do is hope that folks become savvy enough to know the difference between a simple, potentially fun contest (which is what Music Nation could be) and a real ripoff (like those "industry showcase events" we all try to avoid).
What I always find funny, however, is that these promotions always bill themselves as "the first of their kind."