I try to avoid the forums for this show to avoid the inevitable drama follows reality programming but I've been listening since the first week and while it's been shaky at times, the concept is too intriguing and I became way too invested in the outcome of it to not want to see a second season.
That said, I'd make a lot of format changes starting with:
1. Scrap having the podcasts compete remotely.
Instead of recording week by week over the course of a few months, schedule the Challenge for a week or two of daily recording in the Earwolf studios and have the contestants come to LA if they want to compete. Now, I know it's not fair to podcasts located in other parts of the country but lets face it, plenty of talented unknown comedians move west chasing the kind of exposure an Earwolf podcast is going to bring them already; if they're really serious about establishing a show and building a name for themselves, finding a way to spend a week in LA to record is something worth doing. What makes for a good competition reality show is watching the contestants develop and you lose a lot of that with people calling in over Skype.
The interactions between the judges and the contestants feels very detached and comes off more like a teacher grading homework than it should. I don't think Matt would have had near as much trouble conveying exactly what he wanted out of the different shows in the coaching sessions had he been there during the creative process.
2. Give people more than 5 minutes to showcase themselves.
The hardest part about listening to the early episodes is a lot of shows are giving very little content and it makes it next to impossible to really get a feel for them. I'd cut down the amount of shows in the contest to 6 and give each show more time to showcase what they do. For first two episodes, split the shows into two groups of 3 and have them do 15 minute 'mini-sodes' right off the bat with an elimination from each group right off the bat.
After you're down to four, largely maintain the current format only this time when you give challenges, have each podcast record an entire episode. For the judging episodes, have the teams take out the best 10 minute segment for the guest judges to hear but make the full episodes available for download, perhaps as 'bonus content' for a buck or two. The passion generally displayed on these forums says something about the audience of the show and I'm willing to bet if people are emotionally invested enough in the show to start flame wars, they'd gladly cough up a buck or two each week to hear their favorite show. You could split the profits from the bonus shows between the contestants who recorded them and engineer Frank and help make the work everyone puts in to make the show great worthwhile and as long as the whole contest was recorded ahead of time before airing, no one could accuse you of just picking the show making the most money in bonus episodes purchased.
No matter what the format for Season 2 ends up being, I hope it happens and I'm already bummed I won't have a new episode to listen to next Monday.
I really hope Dum Dum Club pulls out the win, they've not only been my favorite in the contest, but one of my favorite podcasts period.