I used to do it that way too, but there are way too many keywords out there. You can find a keyword for "dog food" but you can also find something like "food that dogs like the most" which is actually searched almost the same amount and 0 competition.
I don't relay solely on tools, but I use them to filter out keywords with high average PR, keywords with no ads in Google (bad for adsense), keywords which are product names with the vendor #1 but also to find keywords where you have WP, blogspot or squidoo ranking #1 (low comp.).
Once I get something where all the criteria is met (a list of 100 or so keywords), then I move on to manual. The lucky winners hit page 2 with onsite alone, sometimes page 1, but it does take a lot of time. However, this way, you can build a whitehat site and basically build 0 links, and still make a good income site which can be a backup in case the sites you seo'ed hard get hit by an update.
