I feel that those who want to suggest a theme should be able to compete, but even when entering a contest with your weekly theme; you should be entering it clean without use past sprites. So basically people should only be entering sprites made specifically for that WPC.
I think a vague theme is most likely helpful to prevent any unfairness, but having a very exact theme with not many options and choices would make it unfair.
Also, -ty-'s entry was very well made, but I think -ty- put it very well himself; he restricted himself. When a theme lets you have the option to choose any 649 Pokemon, it's convenient, but the choice really matters. The idea was clever but not enough, this is a pixel contest after all. Although it was a simple yet clever idea, it comes down to colour choices, shading, outline and all that jazz. (Not saying those were the problems with -ty-'s entry, but stuff like that is a big deal in the WPC)