Absolutely. IMO, the contest manager must join the contest that he is hosting, as it will give him the feel of what other contestants are going through. I would even say that contest managers must be enthusiastic about proactively participating in the contests. It will help in maintaining the liveliness and quality of the contests.
Now, having said that, rules must be respected, and the process must be robust. Sometimes, as a contest manager, you have to lead by example, posting your entry among the very first so that more people will believe in you. Again, if, as a contest manager, one is aware of certain information that can give him some advantage, he must address that issue by revealing the info to all. If revealing the info is not possible, in that case, he must refrain from participating.     
If the contest manager is after corrupt money (money he can make by manipulating the contests in his favour) he must be called out.