The problem comes in when artists/art majors who don't pursue a career in art, decide to make art as a hobby. Then they decide to sell it or give it away because they didn't NEED the money. If it was just crappy wannabes making true crap, there wouldn't be a problem as natural selection would deal with it (as in nobody would use the crap).
If you're employing artists, it is likely that you need custom, on-demand art. Odds are good a home hobbyist isn't going to meet your schedule needs to even be in the running for consideration.
But if you're looking for clip-art of dragons and D&D stuff, odds are good somebody is giving it away (and that person may actually be quite talented, but not employed in the industry).
Then isn't it time to up your game, either strategically or technically?
The clip-art crowd likely cannot pay prices for good original art. The online PDF sites ("drivethru" etc) are jammed with cheap, cheap product. So judge those games accordingly, and promote good art games over others. Get online reviewers to review the total product -
including art. Review games yourself and judge the artwork. When I have reviewed games, I review the art too, though I will also give allowances if the art was typical for the time (such as the not great art of the early years of D&D). Clip art use isn't going to go away unless its demonized as cheap. I don't see any problem with "wow, Ive seen this image by X too many times" to bring down a review because of a lack of original artwork. Some people will say it does or doesn't matter. But it does matter because people will judge the whole product.
As for contests, art for free, art for exposure, whatever - that's not going to go away, and it is a competitive factor of business. That's the business side of art and if you are a freelancer, you are also a business person. I sometimes run contests related to art, and the contest will often grant our use of the art for promotional purposes. Paizo isn't going to stop what they are doing.
On the technical side...art really isn't a field that supports "sorta good" art. Back when I first entered college, I majored in commercial art - until I realized 1) there are a lot of flakes in this field I don't want to work with (esp professors not interested in actually teaching) and 2) my art was quite good, but I could tell it wasn't what I would consider competitive. I changed majors, went into a different field, but continued to do art as a hobby. Where my business touches the world of art though, my background did give me the skills I needed to evaluate the art. I can tell if someone is just "sorta good" or if they are professional. You have to be better than that to be a freelancer.