I had a natural rank for my site showing 5/6th in the first page results. Since enabling my adwords campaign I don't show there anymore for that keyword? Is G greedy showing my paid ad in preference to my nonpaid ad? I always assumed the 2 were independent. Anyone had similar experiences?
Yes, google is greedy and no there is no correlation betwwen paid and non-paid results of your site, it might be a coincidence.
I've had some keywords that are too competitive for a quick SEO, so I had them as PPC. When my SEO work started bearing fruits some of my keywords showed up on the 1st page. I deliberately continued running them in parallel on the 1st page of Google results: PPC and Natural. No problem whatsoever: no removal from the SERP, like in your case, no bid increase in PPC, etc. It was ok for about 6-8 months up until last weekend. The natural listing is still there and doing ok. The PPC counterpart stopped showing ads. Preview tool and diagnostic tool showed excellent relevancy, quality and the red warning saying that this keyword is not triggering any ads. The PPC bids went up 30-50%. The Position went down and no bid increase can bring it up. Phone and email talks with G yielded nothing relevant. When did you have your "Oh F---" moment?
Google is a corporation, it strives to maximize returns for its investors. You can say it is greedy, every corporation does that.
There not going to hand out easy-free money to you, adsense is one but google has to make money somehow, think about it.