ok, I've tweak my ads on AdWord a bit and now the CTR of last hour improved to 0.42%. One thing I found is that while google says that I got 100 click, the my site's stat tracking package didn't report any new unique visitor. Can it be that something happen with my ads or my own stat system are faulty? Another thing I missed is a landing page, since now all traffics from ads just go to product category page. So I should come up with a nice landing page, will it help much?
Not sure about other questions you were thinking, but definitely consider landing pages - they can make a world difference.