I've bowled handicap leagues for most of the 31 years I've been involved in league bowling, and only twice I can remember could you "make" money off the prize fund -- and in both those cases, you would only make back a little bit above your weekly cost, so it was basically that you got to bowl 36 weeks for free.
In both cases, it was because the league got sponsored (the local Budweiser plant, both times). And in both cases, it "elevated" the league from a bunch of people having a good time, to some having a good time and some letting their a-hole shine through.
I kind of agree with the concept, especially in mixed leagues with a lot of beginners. Hand out some cheap trophies at the end and kill the prize fund, especially since bowling isn't getting any cheaper. I'm up to $17 for one of my leagues and $18 for the other, and neither has a prize fund worth worrying about.
Having said that, it should still be bowler choice, and if a bunch of handicap bowlers want to fancy themselves as psuedo-pros, have at it.
Jess