yes i understand that adsense can ban you anytime. However, any affiliate/ad network could do (and in fact have done) the same. Look at amazon and how they stopped their affiliate program in some states.
The plan is to start with adsense and get some money flowing before trying other stuff. Ideally id like to sell adspace directly to advertisers. Niche sites can also use a pay per lead model. Generating just 10 leads/month, and selling them at $50 each, gets me $500/month. I believe the real challenge is to find the right niche market and everything else should fall into place.
Anyway thank you all for your suggestions and advice. Despite a lot of negative feedback, I have decided to pursue this model and will start in June with two websites. I'll update this thread with the initial results in October 2013.