[spudnik]

We've had excellent results from AdWords over the last several months. We don't see as much traffic as we do from, say, Overture, but AdWords traffic converts better.

Having said that, I have a few specific comments:
1. Positioning isn't based solely on the amount bid - rather it's a combination of bid and link popularity. This can be a tough adjustment for people used to the Overture model.

2. Google syndicates their AdWords ads, but doesn't break down for advertisers where the traffic comes from. Maybe this won't ever be an issue for you; it is for me.

I haven't seen much variation in performance based on an ad's positioning. The #1 spot doesn't necessarily yield better results than the #3 spot, at least not proportionate to the increased cost.

As far as relevancy goes, I've tried highly-relevant and highly-general (i.e. not at all keyword targeted) creative with very mixed results on both. There's a comfort zone in between the two that I try to stick to.

As with any PPC campaign, I'd advise you to pay close attention to the stats. As much as possible, know the value of each of your keywords and what you can afford to pay per click. Good luck!