I've been reading some articles about this elsewhere (ABC news, Baltimore Sun, amongst other news sites), and a couple significant things should be noted: first, the contest was never cleared by the radio station's legal team. Second, the deejays never warned contestants of the danger, and in fact said the opposite (this quote from abcnews.com):
"Can you get water poisoning and, like, die?" asked the female disc jockey.
"Not with water," a male disc jockey replied. "Your body is 98 percent water. Why can't you take in as much water as you want?"
A number of people called in to warn the radio station about the health risks, and these risks were still never shared with the contestants. When Jennifer Strange was taking part in the contest, she was complaining of pain, and the deejays responded by laughing at her.
I think all of this suggests pretty clearly to me that the radio station did need to be held liable for its irresponsibility in running the contest. There was no research and no warning, and they were further to the public basically saying, "Don't worry this is perfectly safe!" when telling people to take poison.
This doesn't absolve Strange's liability for participating in the contest, but her lack of information resulted in the most final punishment possible, a far more dire punishment than she deserved (the threat of water intoxication is not common knowledge; to her it probably sounded like an easy way to get a Wii for her kids at a time (2007) when getting hold of a Wii was really hard). That the radio station was sued for a mere $16 million is a drop in the bucket comparatively speaking. But better that they be held accountable for their part in the fiasco. After all, if some public entity held a contest of "Win Russian Roulette and win a prize!" they're still being irresponsible and encouraging deadly behavior. No, someone with common sense would not participate in a contest like that, but that doesn't remove responsibility from the people encouraging the bad behavior in the first place. Neither side has to be "right" or "wrong" in a case like this.