It's my understanding festivals get thousands of submissions per year so I'm just invisioning a festival judge looking and re-looking for any minor reason to not accept the film and pass on it.
Zensteve made the comment he did because it does not work this way, it can't work this way if you think about it. Let's say a major festival has 4,000 feature length entries. To watch them all, say 3 times, working a solid 8 hours a day, 365 days a year, would take a judge about 5 and a half years and then they could start on the shorts entries!
For a major festival, the process usually starts with a fleet of interns skipping through the entries, eliminating the worst ones; the most obviously poorly executed ones. The entries left then go through progressively more rigorously examined rounds of elimination with progressively more experienced judges until they are left with a final list plus a few extra (reserves). At a guess, the majority/vast majority of entries are likely to be eliminated without ever being viewed in their entirety. It's this final list which is viewed by the main festival judging panel. The judging panel of major festivals are at least reasonably well respected practising industry professionals who don't have time to participate in the elimination process leading up to the creation of the final shortlist, except
possibly in the very final round of elimination. Exhibition copies are then requested and test screened in a commercial quality screening room to identify technical problems, those with problems which can't be relatively easily/quickly fixed by the filmmaker are rejected and replaced by one of the reserve films. The majority/vast majority of technical problems which cause rejection (at any stage of the elimination process) are sound related problems. And,
make absolutely certain you have fully understood the exhibition copy technical requirements of the festival and are able to comply with them. You'd be surprised at how many films fall at this final hurdle and how deeply frustrating/upsetting it is for the filmmakers!!
The process I've described is a generalisation, each major festival will have developed it's own exact process. It's not uncommon for features to be submitted which are not finished but usually it's just the final sound mix which is incomplete and/or some grading. Obviously a completed (inc. sound mix) copy is required for exhibition, should the entrant get that far. I'm not so sure about shorts though, IMHO it would probably be a mistake to submit a short which is not finished in every respect, except maybe the final sound mix. The temp sound mix used for submission would still need to be of a pretty decent quality though.
BTW, I don't pretend to be an expert with any first hand insider knowledge of precisely how the major festivals manage the logistics of judging/elimination. The above is just based on my experience of being involved in a number of long form projects over the years which have been exhibited at some of the major festivals.
G