Since i'm not on pc i'm not gonna be able to check or try out those things.
If you're not on PC, how do you intent to host the tournament?
In the Oblivion tournament the fights were between NPCs with autocalculated stats. The competitors just picked their race, birthsign, class and equipment. They got free weapons and armor, but the rest they had to buy with a gold budget that was based on their skills. I also edited the armors of the competitors so they all gave the same protection. That way people who were using Leather Armor for looks were not penalized when fighting people who were wearing Glass Armor.
If this tournament were done in a similair way the contestants wouldn't be using VATS because they'd all be NPCs. That probably gives a huge edge to the characters using Big Guns. Give you character a Fatman and it's all over for the other dude. The contestants also wouldn't have any perks, although the host could add some of the perks with the GECK (but some perks are impossible to add to NPCs).
I've also done some testing on how autocalculation works and apparently autocalculated NPCs put all their skill points into tag skills. And once their tag skills are maxed out they stop improving their skills. A character with 5 Intelligence would max all his or her tag skills by level 15. So having high level NPCs would give a disadvantage to characters with high Intelligence. I propose that the NPCs are set to level 10. With average stats (everything 5) that would create a character with 75 in the tag skills.
So here are my suggested rules:
1. Contestants provide the SPECIAL stats, tag skills, and equipment for their characters. The host then creates the characters as level 10 autocalculated NPCs in the GECK. Their Hit Points however are set to what the player would have at level 11 (20 * Endurance + 200). If Medicine is a tag skill it gets added to Hit Points as well. For example if a character has 5 Endurance and 77 Medicine that would result in 377 Hit Points.
2. There would be 8 or 16 contestants. With 16 contestants the tournament would be divided into 4 rounds. The first round would feature 8 duels (so no companions) and the winners would advance to the second round and so on. Each duel takes place in a limited area (I think Tranquility Lane would be a good replacement for Oblivion's arena) and consists out of 3 fights. The winner is whoever is the first to win 2 fights.
3. Contestants get a limited budget for their equipment. The base budget is 250 caps. Characters then get an extra 50 caps for each point of Perception, Charisma, and Agility. With a 5 in all three stats your budget would be 1000 caps. If Barter, Science, Lockpicking, or Sneak are tagged they each increase the budget by a further 500 caps. This makes the minimum possible budget 400 caps and the maximum possible budget is 3250 caps.
4. Contestants use their budget to buy weapons and armor. Fatman and unique weapons are not allowed. You can find a list of armors http://fallout.wikia.com/wiki/Fallout_3_armor_and_clothing (note that helmets are listed seperately) and a list of weapons can be found http://fallout.wikia.com/wiki/Fallout_3_weapons. The armor and weapons are at 50% condition. If the player has Repair as a tag skill the condition is improved by half their Repair skill. For example with 80% Repair skill the equipment would be at 90% condition (50% + 40%). Ammo is free and unlimited. Contestants don't get any healing items or chems.
5. Tagged weapon skills improve combat performance so they provide no special benefits. But non-combat tag skills do provide additional benefits:
-Barter: increases budget by 500 caps (as mentioned above)
-Speech: if your Speech skill is higher than your opponent's Speech skill the first two fights you lose in each duel doen't count towards victory for your opponent.
-Medicine: gets added to your Hit Points. (as mentioned above)
-Repair: half of the skill is added to the condition of your equipment (as mentioned above)
-Science: increases budget by 500 caps (as mentioned above)
-Lockpicking: increases budget by 500 caps (as mentioned above)
-Sneak: increases budget by 500 caps (as mentioned above)