I'm sure there will always be people who will try not to get elliminated, to see how close they can get to last place without being in last. If your intent was to try and get eliminated ASAP and avoid any chance of humilation, then you'd probably just want to not sign up!
That being said, there needs to be some incentive for signing up, like, only participants get pictures of the loser doing whatever is decided, the only problem being that when 63 people have a picture, it's likely to get leaked to the general public. So, I think it'd be best to have a system in which you have more say in what the loser has to do based on when you get eliminated, second place doesn't get to vote, those eliminated in the semi-finals get one vote, quarterfinalist winners get two votes, etc, so that you want to be elliminated ASAP. Otherwise, there's no difference between placing 2 or 64, except I'd actually rather be #2, since it's arguably the most braggable position.
Regardless, punishment should definitely be decided AFTER the loser has been decided, since "punishment" is relative. For the sake of example, say the loser ended up being someone like Atlas, and the pre-determined punishment was waxing your chest.
Also, that example I provided is a really bad idea for punishment, there's no way I would enter this thing if there's a possibility I'd end up having to wax my chest. Cross-dressing is a good one, since the objective should be to humiliate the loser, not inflict harm or pain (outside of the damage done to one's ego.)
I also agree with Nate that randoms shouldn't be allowed to join, although I'm not sure what status would be used to determine that.
Another approach to registration would be to have everyone vote on the top 8 or 16 people they'd like to see play so that the loser is someone that everyone knows. It'd be nice to have participation be obligatory upon nomination, but since that might not go over so well, you could rig it so that anyone who votes is fair game. 'course, then you'd have to have a certain number of people sign up for voting...
If there's anything like this, I'd like to participate if possible since I'm good at CC haxing and I'd like to have some fun again, although I'm probably don't fit under the status of "cool enough to participate," since the objective is to have a loser that everyone knows, and I'm not even cool enough for a custom user title.
One logistical problem that I just realized is that typically, if someone's a no-show for their match, then the other person gets the win and the person who didn't show up is eliminated and doesn't clog up future rounds. However, if you give the win to the person who meets the cut-off, then the loser stays in for future rounds. Thus, it's probably a good idea to keep this small and further reason not to allow randoms.