I had been looking for a way to make Diamond Lake more "real" for my players. They know all the different NPCs from the backdrop . . . well, let me rephrase that. They know those NPCs exist but largely don't bother with them. I wanted to make it more personal for them.
The idea I had (or got from these boards, rather) was an annual dragonchess tournament. The PCs were invited this year since they have become local celebrities after clearing out the Dourstone Mine -- and, of course, because Chuam Gainsworth and Lazare wanted to "buy" them from smenk. The game included Diamond Lake's "elite", including Zalamandra, Lazare, the mine managers (except smenk, plus Tilgast didn't attend), Allustan, the mayor, etc.
I used the rules I found here. It was a double elmination tournament with the players seeded according to how good their bonus was, with an added bonus if they played last year or if Lazare liked them (he ran the games and did not participate).
It was great because we had a little smidge of roleplaying during each game. They made some new allies as well as some new enemies, and got a good cross section of the big players in Diamond Lake. The fighter went out right away (not to social, that one) but the other 3 made it pretty far and the sorcerer had a great come-from-behind victory against Allustan for the win!
This is a great idea, though I wonder how you kept the fighter's player engaged if he got eliminated so quick.