Stating the obvious, but sometimes the obvious is not always obvious. Google's AdWordsAdvisor in WebmasterWorld went on record stating that Google does not use the conversion tracking or Google analytics data to determine the minimum bid for your keywords. That would be evil, if they did, wouldn't it?
And I quote:
Because of persistant rumors and conjecture along these lines, I'd like to clarify that information from Google's conversion tracking and Google Analytics is not used in the calculation of ones minimum bid, nor otherwise incorporated in the calculation of CPC.
I know people who would bet their house that this statement is not accurate. But I would highly doubt Google is looking at a particular advertisers conversion and earnings factors to adjust the minimum bid on that specific keyword phrase.
Forum discussion at WebmasterWorld.

Comments:
Dustin Twiggs
11/27/2006 11:22 pm
If they don't work to fix that image they may start to see revenues dwindle. I realize that Google is huge... But there are a lot of competing advertising companies popping up all over targeting exactly the same customers as Google.
paul
04/24/2007 08:47 am
I set up an adwords account and it worked fine the first day. On the second day, all of the keywords were inactive and the cost-per-click had doubled. Suspicious?