I have asked this question on a number of forums and even Google Adsense Team. I have never got a clear answer.
Just to clarify the question:
Does putting Adsense in a Google Gadget acceptable in the TOS?
I have never had a conclusive answer.
I have a gadget for webfoolish.com (Random Jokes). I dont wish to post the link because I am a newbie  (and don't want to be considered a spammer) but you can visit the site and install the gadget to see what I mean.
Spotless
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