Looks good. One suggestion would be to have the Adsense links block at the top of the navbar and run it for a few weeks in that position to see if it brings more clicks than where it is positioned now.
No its not. Unless you made the "ads by gooogle" background the same as the links, then it would might have been considered against the TOS because its too blended.
I don't see a problem with that. You did give me an idea on how I can do my ads. I wonder how the line text works out for others.