OK, I'm probably going to open up a can of worms here but which do you think is best...?
I've had clients budgeting 3,000 € per month on AdWords and receiving an ROI of less than 1%.

For me, targeted affiliates links are a much better use of resources but the problem there is I have to find good quality websites as affiliates and then convince them I'm not spamming them.

Or, is there another route for promoting a website in a highly competative market when you know that no amount of money will deliver organic position 1 in Google's results.

Is there a reason you can't do both? Why does it have to be an either/or. There are lots of ways to promote a site. You should do as many as you reasonably can. Test them to see what works best and continue to improve them. Reinvest some of your profits in new marketing channels and improving the ones you're already using.

I suggest you go with the Adwords approach first. It does help bring traffic to your site in a short period. Just do some research on the appropriate keyword to use.

I Agree Van Gogh but my long term plan with this project is to move the resources away from AdWords and push them into developing satelite websites for specific products and banner exchanges and paid links etc.

Google adwords is the first thing you should do than affiliate..No one knows what works better for you..You have to test and watch......