I would look at the top three sites listed in Google for that specific keyword. Check the page rank (if it is greater than 5 then it will take some time to outrank), how many backlinks the site has, and the age of the site. Also, if the site is listed in DMOZ & yours is not, then it will be harder to outrank. Here's a free tool that can help you do all of the above steps: SEO for Firefox Extension: Free SEO Toolbar Firefox Browser Plugin

While a lot of the sites have a good number of backlinks and PR, you can see that they aren't optimized for the particular keyword you specified.

In these instances, it can be relatively easy to rank, as you can see by the EMD site at #6 that only has a handful of links, PR0 and keyword not in the title, description or headers.

I'd definitely go for it, particularly with such a good CPC.

If you found that $12.38 CPC on the Google Keyword Tool, you should double check the same keyword on the Google Contextual Tool & see what that CPC is, I doubt they are the same.

That $12.38 CPC is based on paid search, not the Adsense Ads that will show up on your blog/site.

So say the Contextual Tool returns a $10 CPC, your actual payout will be closer to 50% less of the Contextual Tool CPC, which is $5. Note, all that Google data is rough estimates, still the Contextual Tool is a more realistic data source for CPC, compared to the Keyword Tool CPC.