Hmm... Flash Launcher would fit in my opinion into Utilities... Flash is not only for games. And Accessing Services from XBox and PS3 should fit into Network and Communication. (it's very similar to applications like for facebook and twitter - it gets data from the network and shows it in a propper way - and it could provide a system to chat and send messages)

The WebOS Game Manager is a other thing. This could fit into a Emulator and Game Management category. But, there are so much polished Emulators at the moment out there for maemo. Will we really get enought different emulators that joins the competition?
A extra category only for 2 Applications wouldn't work. The last time we had a single Emulator if I remember correct.

No, I don't think so. I would say Fun is only for small applications and really cool ideas to impress other people. To make them laught or to wonder how it works.
There was a 3D simulation application on youtube last year from a student. He never released the code, but he used the front camera for headtracking and adjusted the screen depending of the angle to create a 3D environment inside the N900 screen. It was not a game. It was more like a tech demo. And perhaps more cooler than a iBeer Application... I saw also something like this using a Wii-Mote from Nintendo.
Edit: Perhaps someone could create a Fun application that combine Front and Back camera - so you see a simulated 3D environment (using headtracking and the front camera) and inside this 3D environment you can see your hand that is recorded with the main camera.

Okay, I see. This getting hard even before the first Emulator hits the contest.

Have you asked Reggie if he would place a link to the competition at a prominent place?
Perhaps he could modify the maemo.org Theme... there is a lot of space at the top of this page near the maemo.org Logo. A "Maemo/Meego Development Contest April - June 2011!" sticker with link near it to the wiki page would look very nice.