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As far as I can tell deleting will not hurt the old ads because you retain statistics and you are able to undelete the old ad if you would like to go back to it.
"redwidgets" competes against ad for "redwidgets"
"red widgets" competes against ads for "red", "widgets" & "red widgets"
Now if someone has $5.00 as the max on "widgets" you are competing against that instead of the $.75 you were looking at for "redwidgets"