I think competing certainly does cause you one to improve in BJJ:
Your training is much more focused and you get more interested in improving weaknesses and developing a game plan.
You also put a lot more energy into ju jitsu as part of your life (through time, energy, conditioning etc) and I think that makes you better as well.
Losing a fight of course is a very good opportunity to reassess your game and patch up where things went wrong.
I would say that in my experience at most of the competitions everybody is very encouraging and usually there is a lot of good feeling between competitors, especially after the fight. Generally people will applaud the fact you got on the mat and gave it a bash.
There are a very small number of people who do talk crap and insist on the whole alpha one male bollocks: needless to say that doesn't really make the whole experience very inviting, but you really don't see much of that.
Of course there are loads of people who aren't confrontational in nature and don't really like the idea of competition and that is OK (despite what some steroided jock might tell you) The world needs those sorts of people as well (who wants to deal with a confronational marriage counceller, waiter, hostage negotiator or taxi driver?)
If you enjoy BJJ a lot at your own pace at a club level its probably much more healthy than if you were miserable on the competition circuit.