Walker Books say: "The prize money is comparable with the kind of fee you might expect (as a first-time author) a publisher to pay for a story of this length.
"As far as rights as concerned, it's quite usual to pay a flat fee for this kind of story in an anthology and retain the copyright in the text."
The comp isn't designed for professional writers - it's meant to find new voices. It's an opportunity to get started and be paid (a perfectly fair fee) for a story with the possibility of more work following on from that. You'll have Walker Books, Gransnet and Mumsnet all pushing to get publicity for your work.
Of course, if you think the terms are unreasonable, you'd be better off sending your story to an agent in the usual way (he/she would want to see more than one story of this length). But we think the terms are fair, otherwise we wouldn't have done it. We did look into royalties but it was fiendishly complicated legally with so many authors so we went for a more generous upfront payment instead.
As a published novelist, I think the deal is fine (per word, it's generous compared to most novelists' advances these days) and I would be entering if I were allowed 
But it's up to you - there are more traditional routes to publication you can go for if you prefer.