Luffy will compete in my opinion. He would love the challenge I think!
My guess is that Fujitora will be a spectater; however, he will end up using his ability to make it harder on other competiters.
I'm also guessing that it will be a Team Tournament like Yu-Yu Hakesho: Pitting teams against each other EX: Team Mugiwara vs Team Doflaming. Now I can see a more free for all method in that instance would allow Kinemon and Zoro to have their duel.
Probably the contestants will end up being Zoro, Sanji, Kinemon, Luffy, and Franky to match up with Senor Pink, Lao G., Dellinger, Machvise, and Diamante.
I'm also interested to see how this reflects for the Ceaser Return Team...obviously Law and Robin will have some plan, but I'm curious to see how that'll turn up in light of Luffy's extreme detour.