I like the idea of "profiting from the server, to then throw money for the Twink Cup", but it is an idea. Who knows if people will actually buy a tabard, or a mount, or whatever. I have never been in a private server myself, but just the risk of it being shut down, kept passive etc. makes me not want to invest much into it. And that is what most private servers have done to my knowledge, they have given you instant gearing, for different specializations, allowing you to receive any item you want anytime you please.
This means, hey - you don't have to try and farm gear because yo - its a private server, just have fun whilst PvPing. Which is what most people will lean towards, and that's the reason most of Live's players tend to go to those servers, so that they can just experience something that is not present and past, to re-live it again.
On the other hand, this is something illegal. You can earn money through it (if all goes as planned), and then fund it to the Twink Cup. But all in all, this may ruin the reputation of Twinking in general, because the cup itself holds a name that characterizes most of us, players here.
That is just my opinion on the matter.