Long term high intensity output will lead to burnout, even if the salary is 10x people would struggle and crash. Pushing at 100% full enthusiasm is like sprinting, it is not possible to maintain that intensity for very long. It can be fun, it can be productive, but the wiser approach has the long-term and end in mind.
Regardless of all of that, in my experience a typical impressive hackathon project is still just a barely working demo that benefitted from a significant amount of research and planning beforehand, and will require an even greater amount of hardening and polish afterwards.
There is no magic, it's just a vastly different kind of work environment with both inputs and outputs incomparable to day-to-day work.
A proposal like this could easily have been seen as the developers wanting to test out a technology that was not approved or with a good business case. That business case is usually something that only sales/product can sell. The barrier to listening to developers is higher because they are assumed to not know enough about business.
You may have an "agile" environment, but you often need a very good reason to not pick the next item from the backlog, which was not created and maybe not even prioritized by you.
In those companies, the hackathon may be the only time developers can present their ideas.