LucidSW - 6:49 pm on Jun 22, 2012 (gmt 0)
The search partners usually have lower CTR and lower conversion rates. But not always. It depends. If you notice lower numbers for the search partners, by all means opt out.
For the second, which did you choose instead? I assume "people in my targeted location".
If your keywords are too broad, I'd opt out of the recommended setting. If your keyword is "metal widgets", it means someone in Europe would still be shown your ad if they searched for "metal widgets chicago", if you are targeting the Chicago area or, I believe, the whole US as well.
I already include plurals as keywords. Misspellings I don't. Not unless there's a very large percentage using that misspelling, otherwise I don't think it's worth it. Besides, Google handles that.
As for the setting, must be relatively new since I never noticed it before. I'd leave it to the default setting.