The only way I see a "serious" X-Prize concept game working is if it's more of a simulation...limited budget, choose the style of craft (ground take off, vertical launch, air released, etc...), select construction materials, build it, and fly it to space with realistic physics...obviously that would be a huge project and NOT cab friendly...
On the other hand CHEESE IS GOOD...especailly when drizzled over French fries! I say make a vertical scroller and CHEESE IT UP!!! How about a scrolling race against other X-ships.
Gameplay: A single player vertical race from the ground (start) to space (finish). The player starts with 3 ships (lives). Weapons are used to slow down, temporarily disable, or destroy other racers. Obstacles will have to be avoided or destroyed to prevent damage to your ship. Power-ups along the course will aid the player and help keep a balance between the ships.
Levels: First level is from Earth to space...other levels may be from the ISS to the moon, the moon to mars, through the asteroid belt, etc... At the end of all levels a layer of difficulty will be added (eg. increased game speed), and the game will loop. After the levels are completed a second time another layer of difficulty is added (more obstacles, fewer power-ups, whatever...) and another loop. After all levels of difficulty have been added and completed the game restarts (keeping the players score intact).
Ships: Use X-Plane designs...but Cheesy! Cartoon like! The player could choose his ship at the start of the game depending on his strategy (some ships could be faster, some have better armor, some better weapons, some better maneuverability, and some more balanced)
Weapons: Each ship would start with a unique reusable weapon and could pick up additional one time use weapons along the course (only two weapons at a time). Of course the weapons should be CHEESY! I'm thinking super soaker style water blasts that can extinguish the engine flame of the competition and stop him for a set number of seconds, releasing a cloud of methane that will turn your opponents ship into a burnt, cartoon cinder if he can't dodge it, a dart gun that releases a parachute when it strikes another racers ship...slowing him w-a-y down, a more traditional (but still very cheesy) projectile weapon that can damage an opponents ship or destroy an obstacle, lasers, etc...
Power-ups: Power-ups can give you extra ships (max of 6 ships), extra points, weapons, a burst of speed, or shields to reduce damage.
Scoring: Points will be awarded throughout the game for obstacles and opponents destroyed. At the end of each level points are awarded for finish place (1st, 2nd, 3rd, etc...) and a bonus is given for the number of lives left. So you could choose to rack up points by blowing stuff up or try to win the race...there should be a balance so either strategy will score about even in the end (due to different ship types).
Other thoughts: I think a command line option to enable the game to accept credits would be great...more freeware authors should include this. Maybe throw in some "special" levels...a Space Invader style level, a falling meteor level, a fly through the loop level, etc... Possibly allow points to be spent to purchase weapons upgrades at the end of each level. And use standard file types for all the sounds, sprites, and even ship/object variables (speed, strength, agility)...so the game can be easily modified/improved upon (eg. good graphics could grow into outstanding graphics).
Those are my thoughts...lame as they might be. I know I've described something decidedly more ambitious than a simple shooter...but I think it's doable. Love to hear other ideas opinions...
NoBonus, Since this is your idea, I'm especially interested in your what you think...
And Howard...I'm open to any stone throwing you might like to do...

Edit...I'm a creative speller...
