First of all thank you for the reply, I'm glad to see it and that you agree with some of the things I said.
Unfortunately the more controvercial part is going to take more convincing before it's changed, so let me say now that I don't want you or the staff to be defensive regarding event host payment, instead I want you to keep an open mind about what system is better, the one you are using or the one I propose.
This is what I am arguing the solution is:
Pay event hosters (approx) 800 gold each event, (approx) 500 for assisting, instead of incentivizing staff to out-perform the players they are hosting for.
This change is not going to hurt event hosters, but it will help the community.
For many reasons I will now discuss, my system is simply a better alternative to yours because it removes from the equation of event hosting.
I think you elaborate too much on punishment, my idea is about prevention, which is simple enough by paying a rate of gold for the job of hosting an event and letting other players fight each other over the prizes.
With the current system, if I'm not mistaken, an event hoster only gets paid if they win the event.
I sense that it is better for the server that staff be paid a flat rate per event, even if they participate in the fighting, because it allows for regular players to have more odds of being rewarded, making it more appealing for new players to register. People won't be expecing power-house veterans like Lockzilla or DrLukifer to be claiming the majority of prizes.
It is inherently better for the server if players who might quit tomorrow are encouraged to stay by winning events and prizes. There is much more "community value" in regular players winning events as opposed to the server staff which serve them. Staff are far less likely to leave than your average player, therefore events can and should be more oriented towards attracting and keeping players.
You're mistaken because the events rules for players are not in question here, it's partly a problem of skill, but also the amount of participants.
This means when any staff hosts a free for all event late at night they will, by definition of lacking competition, have increased odds of winning.
If an event hoster has to decide between peak-time events and late night events they surely have the potential of a conflict when they realize the simple truth that they are more likely to win gold by having less participants, less potential for more skilled fighters.
I'm not saying any GM abuses this simple fact, but the potential will remain there for new staff to feel happy about events with less players until the method of payment is changed.