I hear ya, trust me. If we'd been around when forums were first popping up it would be easier to get traffic. But nowadays you have so many other forums out there with very well established members, that it's hard to find a way to get those members to want to come to your forum instead. I think the competition or 'prize' thing would be a way of doing it. I also think my idea of potentially offering something like free t-shirts to every member who reaches 1000 posts is a decent idea. I think things like that would be cool because they reward members for participating in your forum. Eventually once you get enough traffic you could yank those promotions. Initially you'd have to spend some money, but I think it's probably foolish to think you can ever start a successful website (or business) without putting some of your own money into it.
As a web designer I spend a ton of time each day on Google AdWords and other marketing campaigns for my clients. I've got clients who pump 10k a month into Google AdWords and have great success from it. Of course they have that kind of money to spend, so it's not an issue. I'm not oppose to putting $500 a month into my forum to make it grow, I just want to find the best way to do that, and I think right now AdWords isn't working due to the fact that there isn't enough content, and no one wants to be the first to the party (so to speak).