I'm pretty sure they are NOT ok with google. Google's TOS prohibits 'brining undue attention to the ads' I think that qualifies as undue attention
I dont see why it is not allowed. It is a technique I have used before. Just like an ad rotar. We use them at http://www.internationaldeveloper.com/ and http://www.blockbuster.com.au They are very effective and i think they should be alright, although they are likely against google TOS
it should give a better ctr but if its against adsense TOS then it wont get you anywhere in the long run. nobody wants their adsense account suspended do they?