I have been doing paid search for a couple of years and have had different results when comparing the Traffic Estimator to Adwords results:

The most common outcome I find is the estimator tool shows more traffic and a lower cost per click than actual adwords results. I have even had the cost per click off by 40% more than the estimator tool.

The problem with the tool is there are too many variables that the tool can not account for. Other than cost and keyword, you have to deal with the quality score that looks at the ad you write, the landing page the ad is pointing to and click-through-rate (ctr).

In the SEM industry, the rule of thumb is to take a small amount of money and test paid search. It is the only way to get a good idea on the environment you will be competing in.