Hey GuitarZan - I wanted to come back to each of your points in detail - let me do that now (please forgive the excessive quoting here).
I start most campaigns off with only Google. I then test run the search partners and content network to see how it affects the conversion rate. I said to stay away from search partners and content network because (as a very general rule) the net effect on conversion is negative. So you need to work on it and it is easier to just start off with Google.
It is quite complex for a beginner (for anybody actually). What I was trying to illustrate is this: if you start off testing different creatives and positions then you will know what works before you start - you won't have three weeks of loss making adgroups before you say: "aaarrrgh, I've got to test all this stuff now!" If you start off by testing and learning what works best then you'll be happier in the long run.
This is a really hard question - especially because the way a keyword converts isn't always consistent. But at some point you have to make a decision, right? You know your industry - so you make the call.
SiteMatch is Overture's paid inclusion/PPC hybrid into the Yahoo results.
Again, yes it takes time - but it is time well spent. Of course people use software to do this. I like to use Google's data for the cost, my own tracking software for the conversions and I collect all this in a (stupidly) large spreadsheet for each campaign. I like to track each keyword - so it takes some time, but, as I said, it's time well spent.
No problem. :) If you see that a keyword is consistently doing very well you should be thinking "why?". So - this could be a seasonal thing, a brand thing, a time of the day thing - whatever. Maybe you've just got more coverage than your competitors. If you find out why it is working you can expand it (more, similar, keywords and phrases) and try to milk it for all it's worth.
It is a lot of time invested and the only way to do this is manually. But it will give you an idea of what your competitor knows, how their pricing works, how smart they are etc. This is valuable information, and if you find their mistakes, you can take advantage of them and (at the very least) make sure that you're not making the same ones.
Hope that helps. :)