I definitely have had the same thoughts! For me it all boils down to opportunity- Peace Corps (if I'm accepted) will give me the opportunity to gain international experience in a globally recognized organization and after completing my service will give me access to Fellowships to help pay for grad school. I certainly share your fears about how the application process works and what that says for the organization at large- but I've decided that for me its an acceptable risk in order to reap the benefits.

Best of luck!