Here's how its done on the other site I run
About ten days before the end of the month, the membership puts in nominations for the "member of the month". (I use a form that is connected to the username database so if you can't remember how a user spells their name, it "suggests" the correct username for you based on what you are typing...)
After about five days, I take the four members with the most nominations and create a poll that lasts around 5 days that everyone votes on.
The winner writes up a few paragraphs and include a few pictures which is posted in the "Winner's Forum". (Check out their write-ups HERE
I kinda like the membership voting on a winner. It doesn't have to be about who has the "best or shiniest" bike, but who helps out the most when others have problems or questions and is just an all around great person. I think that is the true meaning of a "Member of the Month" type contest.
I have it on the other site that members can only be nominated once a year so the same people aren't always winning.
Thoughts? I don't have much for prizes right now, but winners can get a additional rank banner (Kinda like the Site Supporter banners by your username) indicating that they were a winner as well as additional picture storage, etc...and of course their picture on the homepage for a month!