Well, the other things is, most of the small-timers and hobbyists have a much better handle on where their animals come from and/or are going, simply due to the scale of operations.
Biosecurity is indeed an issue due to the potential of bioterrorism, and that is part of what NAIS is trying to address. However, NAIS is indeed overkill, especially for small producers (or subsistence types) because they are unlikely to be very inviting or effective targets.
I agree that a better, more cooperative (and less high-handed) process would bring about more participation.
I don't feed my animals ground up dead animal parts and, therefore, have virtually no chance of ever getting BSE in my herd. While there may be many economies realized by huge cattle feeding operations, the ultimate cost of their more deleterious practices should be borne by them, not their smaller, family owned competitors.
But, back to the subject of this article, it was wholly legitimate of the fair board to require that entrants be able to prove where the contest animals came from. It would shock many of our suburban brethren, but some little girls don't really raise their own 4-H steers.