I did one, but it was in Hamilton, Montana at Rocky Mountain Labs. It's part of NIAID, and they have people there studying Lyme disease, chlamydia, prion diseases, plague, etc. If you like the outdoors I would recommend going there just to spend summer in the Bitterroot Valley. It's gorgeous, the weather's great - bone dry so it's still comfortable even in August, they have beautiful mountains, rivers, great hiking and fishing. Plus it's probably less expensive than Bethesda. Missoula is a neat town and it's nearby. RML is a fun place to work, too. The attitude is a lot more laid back than in most research centers. The postdoc I worked with was kind of anal, but he was the exception.
As far as competition, they place 1/4 to 1/3 of applicants, so it's competitive, but there were people working there who hadn't done research before, so it can't be too competitive. If you've done research, that's good, and if your PI knows someone at NIH, that's even better. Have him/her write you a letter.
The stipend depends on your level of education and previous experience. Mine was a lot higher than $1700. As far as how it looks to med schools, I think they like it, possibly more than research at your university, since they're familiar with the quality of research at NIH.
Hope this helps.