Come on peoples... don't be a lurker... post something
They may call your former employers to check your dates of employment, but for your actual references you can list people that you volunteered with/for as opposed to employers. (I believe they allow one personal reference and two professional references, but the professional references can be people you volunteered with or for, not just formal work). I believe you would make it to an interview, depending on what program you are applying for... but then your 'competitiveness' depends on how you are able to apply the experiences you have to volunteering in the Peace Corps and a demonstration of your flexibility and commitment.
They will only contact people you list as references. You are required one personal and one professional reference, and volunteer OR employment history can be used for the professional work experience. I would recommend listing someone from an experience most relevant to the position you are applying for. If you've already submitted your application with your references, you can have them updated by emailing firstname.lastname@example.org, or by contacting your regional recruitment office. Your references will not be contacted until your interview is scheduled.
They MAY contact other people in your employment history, depending on what else might be there.As Amanda said, usually they only contact who you list (or to verify employment). The being said, I had previous federal experience that required BIs, so PC legal actually had to get some information from them before I could be cleared to swear-in. Though, as I mentioned, it was the legal/background office who did that, and not the placement officer.As for competitiveness, honestly, no one can actually tell you - regardless of what you might hear. It completely depends upon the applicant pool for the positions you applied for at the time you applied. You may be VERY competitive for one position this year, but if you were to apply for the same position next year, you may not even get an interview. Again, very dependent on the rest of the applicants at any given time.That being said, I absolutely agree that you have a good background! We currently have two people here in my current country with EM backgrounds, and it's helped both! Also, don't sell yourself short on retail experience - there's some good stuff there: dealing with people, dealing with DIFFICULT people, problem solving, attention to detail, customer service, etc...Good luck!!!