I don't think so, although the villagers will complain about how much you suck and how disappointed they are with you, and they'll do so with sad/angry faces, so it's pretty discouraging. But keep trying, it's awalys funner to enter a festival than just getting your little pixel butt there and doing nothing 8|
In some Harvest Moon games you get friendship just for joining, even if you completely fail. I'm not sure if Island of Happiness is one of those games, but I know that you will never lose friendship for getting last place.
