A large portion of the top content on HN comes from peoples' personal blogs. While these blogs often run ads, I seriously doubt those ads provide much income beyond covering the hosting bills. So people are obviously willing to write for free.
HuffPo realized there was a market opportunity in connecting people who were writing for free anyway with an audience for their content. I guess my biggest problem with their business model is that the offer seems like a freelance writing gig and could obviously dupe someone who doesn't ask the right questions.
So in the end I don't really have a problem with their business model, but their approach to sourcing content seems a bit disingenuous. If they were more up-front about the lack of payment, I would have less of a problem with this.