The traffic estimate is just that: an estimate. The software comes up with the number based on the information it has and some, like what your quality score is, is an assumption. Actually, it assumes you have an average QS. There are other factors as well.
Basically, ignore these numbers. Simply build the best campaign you can and improve from there. I hardly pay attention to the search volume and certainly not how much traffic the system thinks I can get. I will on occasion take a look at the estimated first page bid if I really don't know what I should bid but it depends on other circumstances. Once the campaign is active and I get real data, only then can I truly act on it and adjust.
That 100k to 1M is likely true. However, my guess with that sort of volume is that your keyword is probably too generic. You should rethink and be more specific. Also, if a keyword has a suggested bid of $1, increasing to $40 does not give you more clicks because Google adjusts for that sort of thing. First, you won't get top positioning unless you have a great QS which is 7 and above. You won't get in the first position with a poor QS no matter what you bid. Second, I speculate that bids that are much higher than the average are artificially reduced so that advertisers doing so are not taking advantage even with a great QS.
