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BTW, this is not Adsense for Search, we are using a proprietary search function.
The problem you may have is when a search is done and no results have been produced. I've run into this problem running a Search Engine many people come in and type in crazy searches like "fhjkghdkfdhf" and because the ads show prior to the results of the page being produced I can not go back and NOT show the ad so instead I try and display something else, like -
No results were found check out these other great pages within this site that other have found to be of use. then you can put in a list of you High paying pages and hope people follow trhough to them.
As far as I know it is allowed
I don't want to use the adsense search as it puts several ads above the search so it's confusing to the searcher. I thought I'd put the ad at the bottom of the page so the search results would be seen first.
Also I put the search box on each page and don't care to have the Google logo on all of them. It really sticks out like a sore thumb as my design has an antique look.
That clause seems to have been dropped, but there is still the "No-content pages" clause they could fall back on if they chose!
I position my ads as a row of 4 ads at the top and bottom of my search results page. The ad color scheme matches my search results. The size is quite different to my search results so it is relatively clear which are my results and which are Adsense ads - I am not trying to trick visitors into unnecessarily clicking the adsense ones.
I have set up adsense so that if no suitable adsense ad is found, it displays an ad about my own site taking them to the latest article I have written.
I also use FDSE for site search on this site.
My adsense click through rates are in the region 2-5% on average over a month on site search results pages.