I was never one to want our DD to be involved in competitions especially when she was learning piano. Hard to say why but I didn't want her to be stressed and like you say, it was about learning and loving the music, not winning. Having said that, through one thing and another DD has been in different types of competitions. She was in the Eistedfford with her ballet group age 7 or 8 and a spelling bee. She has since done lots of academic type competitions and debating. It's not the same as what you are perhaps talking about but DD wasn't scarred and actually it has helped in lots of ways I didn't anticipate.
DD has become increasingly competitive but we don't put any emphasis on being in a competition other than taking part and using it as a way to face a challenge and, at times, fears. It is a good way to learn about not being the best, unless they win.
I have come to the conclusion that competitions aren't bad, it's more about the way you approach them and what you plan to get out of them. If it can be done without pressure or expectation or major meltdowns based on the outcome then have a go. Learning to both win and lose gracefully is a good social skill.
I was proud of our DD this week. She entered her first swimming race. She came dead last by a long long long way but I was so proud of her being involved and facing a fear. A kid she didn't know saw how nervous she was and yelled out to think of Maths equations. He obviously knew her. She thought about Quadratics all the way down the pool. No competitions aren't all bad!
