vinny, I think clickfraud is most definitely overblown. +/- 10% differential is par for the course, and isn't neccesarily click fraud. Server error has a lot to do with it. If I checked my stats with awstats, urchin, and webalyzer I would get wildly different numbers. Same with adwords reporting vs. whatever you're using to track activity.
my opinion on click fraud, it's a fantastic selling tool for certain unnamed analytics providers. fear is a great motivator.
i agree completely with you on Google's intentions with this move. although i am starting to see problems with their execution, as usual. too often they are throwing the baby out with the bath water. i think that many mom and pop advertisers won't have the resources to obtain the guidance needed to adjust their campaigns properly. i posted adwords screenshots from a brick and mortar real business on my site as an example. they're not arbitrage or affiliate focused. anyhow, from what we're seeing most of the fundamentals to counteract the quality score changes are similar to basic seo fundamentals. i don't think search agencies will go under from this, i just think they'll be more important than ever.