The trick here is targeting, how well are you targeting? Almost every "new" adWords user I encounter is under the impression that the more words they put in, the more clicks they get - which in a sense is true, but but this actually dilutes your results as you get clicks from people who are not looking for your specific items/products.
Most of my ads contain 3 - 5 words. MAXIMUM. Just more ads.
I think the "set it and forget it" applies if your market doesn't change, not so much the competition. If you sell blue widgets, you go through an initial phase poring over your stats, seeing which ads work, which ads don't, drop the poorly performing ones, then once you've figured out it's as good as it's going to get, you don't really need to change those. What you *do* need to do though, it throw experimental ads in, such as "large blue widgets" or "small blue widgets" to see if those pick up for you.
The biggest problem, I think is objectively determining whether or not the words you are using are truly the best. An example is several commonly typo'ed words can often bring a lot of extra traffic.