Participation points I suppose exist for one reason: to motivate players to participate in more fights.
If somebody has more points than you because of it that means you weren't as active as them.
Of course it begs to question whether such motivation method is right for a forum RP setting.
I mean we only RP for fun and when we have free time. If somebody plays more and gets ahead because of it then I suppose many people would feel cheated. Or worse, be motivated to play and compete at the expense of their offline lives.
So perhaps abolishing this system may be preferable, given if the majority agrees.
Of course for the sake of fairness I'd also suggest retroactively removing all the point gains from lost matches.

As for losing points for lost matches, that might be counterproductive, too. I mean it works fine for raising the stakes but it'd also result in some players getting dropped off the tournament. It also increases the gap between players which while can be preferable, also can destroy the motivation of lower ranking participants. Say you lose 100 points while the victor gained 100. That'd mean he's 200 points ahead of you. A system like this may only work if it's necessary to edge on the competition. Our arena environment in comparison seems to be almost lukewarm. No offense here, I actually prefer it that way. We play for fun and not for the desire to beat each other at all costs.