I guess the fact that it's taken me well over a year to complete the challenge is proof of my general antipathy towards fan fiction, which I acknowledge is somewhat hypocritical since I've written plenty of stories about characters from my Clone Wars campaign. The fic I've read for the Challenge has never been bad--just weird (to me), since it involves such a divergence from established character relationships on the show. There's nothing wrong, of course, with stories set in "alternate universes"--indeed, the idea is a staple of genre fiction (Star Trek's famous mirror universe where everyone is evil, Buffy's alternate world created by Anya, the "Days of Future Past" stories involving the X-Men, etc.). The difference for me, I think, is that those stories are all told in the context of visits from the "normal" characters we're familiar with, whereas the fan fiction is very much its a product of an idiosyncratic view of the characters and requires the reader to accept certain premises (that Spike & Giles could become best friends, for example) that I just can't swallow based on how I think about them.
I can understand the allure of fan fiction--for writers, it's a chance to tell stories using characters that are known and loved, with the option to have them grow, change, or even die; for readers, it's a free, and (almost) limitless resource for stories about characters after the "official" ones have been exhausted (after all, there are plenty of people who can't afford DVD sets and published novels). Still, I gave the fic in this Challenge a more-or-less fair shot and I can safely say it's just not my thing.