After having to do my project on education and learning process I agree about the skills and attitude that should be encouraged. Practice makes you better. Stick with it because it's worth doing -- win or lose. Get the joy from the activity -- not just for the reward. Failure is how we learn.
But, this obsession with criticizing or mocking participation trophy's is just non-sense. It's not even a little factor in character building. We all like to get things. Look at adult events. Nobody is confused about whether they won or not or whether they are on a club team or an elite team.
There are bigger issues in this regard in the academic grading world -- where mistakes are punished and aren't just part of the continuum of learning.
The only criticism I can take seriously regarding participation awards is that they are a waste of budgets and end up in the landfill. They are a non-issue with regard to the future character of our youth.