"My first choice, and the one I'm pushing for is to award full prizes regardless of where you live." - derrick
This is the best tact to take, a single contest for everyone (both inside the US and internatinally) would be the most vibrant and open, including as many countries as you can feasibly fit in. Next best would be a single contest for everyone that offered non-monetary prizes (à la your suggested international version). Worse off would be 2 contests, one for US residents (your prizes as-is) and the other contest for everyone else (non-monetary prizes only). Worst would be a US-only contest.
The fact that you have received mail from people (not just me) requesting more international inclusion is actually a good sign: it shows there are a large number of people outside of US borders that are involved in MacOS X endeavours, and that O'Reilly's popularity is enough that many people really care. I know you must have to put some effort into making this contest as inclusive as possible, and O'Reilly may also have to pay out money for legal bills to do so - for a contest you were under no obligation to hold in the beginning! I'd just like to say that your efforts to do this are very much appreciated. This fair, open & international attitude is a fundamental reason why O'Reilly remains near the heart of many people's programming world.