I don't reckon smashing the ice does any harm at all, dragging a lump of metal across the bottom must stir it up a bit.
Stillwaters tend to be a bit clear this time of year so injecting a bit of colour into the water can only improve the fishing. I've had a bite 'first chuck' a few times after smashing the ice on local ponds.
The prizes were great, but look at the income. Over 3000 anglers with an entry fee of $30 - $35, so that's between $90,000 to $105,000 .... and I bet many of the prizes were donated by local businesses too!!