I was good at sports at School and had a hard time deciding what events to go in for (we were limited to 1 x track, 1 x field event and the relay, IIRC) and so that everyone could participate.
I was good at Javelin and High Jump and could run the 400m, 1500m and sprint quite quickly too, so the relay was also an option.
I chose the High Jump, 1500m and was also in the Relay Team most years as I enjoyed them all. I always (and I mean always) came 2nd at the 1500m as the same kid in School always came first. I kept up with him until about the last 200m and then he just waltzed away with it (git!
). Never did me any harm by "losing" out to him each year - I relished the chance to try again.
Non-competitive Sports Day seems pointless.
By all means we want the kids to enjoy themselves, but healthy competition can get them to give that bit more and perhaps they'll pursue it further as they grow older.