atwoz - 12:02 pm on Dec 14, 2009 (gmt 0)

You should separate out the non converting/high CPA keywords in to a separate campaign and have only the top converting/low CPA keywords in the current campaign. Give the maximum budget to the top performers and the remaining to the low performing campaign.

Do a search query report and add more positive and negative keywords in to appropriate campaigns.

"Would it be wise to start with an automatic placement and check the high CTR websites, and then select them and make a placement campaign?"
No, look at the ad placement websites that is more related to your products and choose them only. CTR is obviously important but it should come from relevant websites, only then you would make some revenue out of it. Since you have a limited budget try spending some time on researching for relevant website instead of spending money elsewhere.