On a related note: if it is true, does that suggest that, as far as we take the diminishing utility of money for granted, by using extrinsic rewards, we are reducing the number of extreme performers? (in so far as we can't keep giving exponential rewards, and money/tokens/what have you motivates in proportion to their utility).

I think the positional qualities of money compensate for this somewhat. People still work hard because they want to keep ahead of their neighbor/coworker.