The criteria on which users will rate your entry are concept (gameplay), presentation (visuals) and how well it fits the theme. The theme is also put in place to make sure everyone starts creating their game at the start of the jam, no earlier. So yes, the theme is mandatory.
Viewing post in is the theme necessary or just optional?
Good to know! Maybe it's good to put these criteria in the rules/FAQ too.
By the way, since I'm posting in this thread anyway: I wouldn't call using Kenney assets "the real challenge"! It's actually a service, to level the playing field for all game designers / developers without artist skills (like me). Creating a game with only Kenney assets is easy - I just submitted one to a game jam last week (and it isn't the first time). I'm not sure whether I'll have time to join in august though... :-/