People tend to compete in hackathons not for the prizes/job. They do it because you can spend a small amount of time producing something tangible which you can understand and be proud of. They are rewarding, intellectually stimulating, and fun.
In game design circles the equivalent of a hackathon is called a game jam. They are almost universal and are seen as an excellent opportunity to both try out ideas and socialise with other people that you wouldn't normally get an opportunity to work with.
> Almost everyone that attends says they are exhausted by the end [...]
Same is true of the gym. That's not an argument against.
> [...] you tend to consume unhealthy food & beverages in the process.
That's a function of planning. When we run such events we provide healthy food (fruit, primarily) for free. But we also have pizza, as we do at all of our other social events. That is more of a function of group events than of hackathons per se.
I think your concern for the well-being of hackathon participants is admirable, and if you ran such an event I think you would do it very well. Have you considered organising something?