Well people who participate in official tournaments can't use hacked monsters and I doubt they all managed to capture or breed perfect monsters to have an equal standing with one another. I've been at a Nintendo Event were SPP staff members were talking about several Smogon users who were caught cheating, so I mean it's not that people haven't tried to enter using programs to create what appears to be legit monsters. Rather than go through extra expense for a game and hacking device, just play online for free with NB. Zero effort to build a team, perfect way to have fun on an equal playing field, and nobody has to wonder if foul play was involved in their loss.
That just means that the pokemon weren't hacked correctly. It's definitely possible to create hacked pokemon that pass all legitimacy tests, those people just didn't hack them right.
In that respect, though, I do think that "competitive" (by that, I mean official Nintendo tournaments and such) Pokemon has a serious flaw in it. In basically every other competitive game, everyone will have the same set of tools to work with. In a fighting game, for example, you all have the same roster of characters to pick from. In an RTS, you can choose from whatever race you want. But in Pokemon, the playing field is not equal - the pokemon you have most likely aren't going to have the same IV's as your opponent's, which makes "Official" tournaments much less balanced than unofficial ones held online.
Battles should be more of a test of your skills and the strategy you're implimenting to win as opposed to like.. a test to see who's a better hacker. A lot of people advise me to just stick to battling Smogon users, but with it's advertisement on places like Gaia Online, where the most popular users are the ones with Levitating Pichu with 800 HP and Fire Blast.. just kinda pisses me off that this place might be flooded with gimmicks soon.
Again, stuff like that isn't the type of hacking we're talking about. That sort of hacking is pretty much bannable anywhere, I doubt anyone would argue with that.