1. I'm too old to stay up all night. So, for me, a 24-hour hackathon is really 18 hours at most.
2. The prizes aren't really worth it (yet). One prize took 6 months to receive. At AngelHack, I probably wouldn't have accepted the $25K convertible note.
3. The "free work" thing is a myth. I thought that too, but no one is forcing you to open-source or commit your code (from what I can tell). You're basically just giving some companies with APIs something to blog about. Sure, someone could steal your idea but that's a risk anyway.
4. Meeting people is a big benefit. I'm a founder and in between SF and LA, so I don't have connections like the valley startups. Doing a hackathon every quarter seems like a good way to meet potential partners, employees, contractors and investors.
5. Skills/resume boosting is the other plus. The skills I learned at these hackathons have already helped me and I likely wouldn't have got them any other way. Plus, none of this looks bad on my resume should I, God forbid, ever have to work for someone else.
Just avoid people who are looking for free labor, find other people that are there for the same reasons and you'll enjoy yourself.
It's an event, and the opportunity to do something interesting and learn something new. That's why I did it.