Will bringing in traffic from banner exchange sites count as valid clicks for AdSense? e.g. free-banners.com
If you mean from a banner ad on another site, then it s fine. You can also get organic traffic. No paid for traffic schemes are allowed.
You cannot directly use the google ad as the banner that is being exchanged. However you can use banner advertising to advertise your own site.
That's simply untrue. Google is fine with paid advertising. it just doesn't like any shady advertising like traffic exchanges. They also recently changed the policy to enforce the AdWords Landing Page Quality requirements on AdSense publishers who advertise. I blogged about it here: http://www.admoolah.com/blog/index....-landing-pages-and-three-link-units-per-page/ Banner exchanges should be fine, as long as there isn't anything fishy going on.