As for where does the money go... i can't answer that but i would guess that some of it goes toward the State final. It is $350 per team for 8,9,10 games in the zone final and it is the same (I think!) for the 18 game State final. The state final also includes monetary high game awards.
I would liken it to masters qualifying. You pay extra prize fund during qualifying that goes into the pool for the final and your masters qualifying position does not matter - it is all about qualifying for the final.
From the last time that I bowled Emerson what you are saying Gary is correct. The surpless money from your zone final entry fee props up the state final prize fund (I dont know if it is still the case but goldpin fixed the lineage to a nominal figure per game ie centres if they wanted to host a final (zone or state) that was the lineage figure that they had to accept. There are cash awards for every high game (mens/ladies) at state final, medallions for 1st, 2nd and 3rd as well as shirts for the State final the winning teams. Because you have all of the figures ie prizemoney required and lineage costs you can work out a surpless figure (above lineage) across both the zone and state finals.
You can ask (i gather that it still is) Ray Hodge or your centre rep for a cost breakdown.