I am confused about the AdWords Ad Diagnostic Tool and its relation to average position. Next to each keyword, scrolling over the magnifying glass gives you a message of "This keyword is OK" or "Your ad is not showing on the first page". This I understand. However, I can't correlate this with avg. position. I get the "not showing" message for some keywords with an avg. position of around 3, and the "OK" message for some keywords with an avg. position of over 6. Shouldn't these be correlated? Which "measurement" is more accurate? Thanks for any advice...

I was wondering about that today too. That is confusing the heck out of me. Hopefully someone can sort this out. It has not bothered me enough to email Google. It may have something to do with a slight delay in Adwords.

I have had Google tell me my ad was not allowed yet I have tons of impressions and clicks showing up for it before they review it.

You must remember that Google is almost like a living breathing machine that is constantly changing depending on what it's users are doing. I have also noticed sometimes that certain ads will have an avg. position of 2-6 even though the magnifying lens says that they are not showing on the first page. A reason for this is that during the course of the day, there may be moments in time when your bid is high enough to be worthy of showing. Don't forget that there are many competitors clawing their way to the top of the list and if some of them drop out of the race, then you will move up relative to your bid until someone out-bids you to steal your spot in line. For the most part, if the magnifying lens says it's not showing on the first page, usually that's true.