I think keyword selection is as personal as the car that you drive

I personally use Market Samurai and my selection of keywords are based on a number of personal criteria:

* Will I be using PPC or SEO as primary traffic source? If I plan to use PPC then I don't care to much about competing pages, but if I use SEO I want to have less than 150-200k competitors on SEOT phrase match of my keyword. I also check SEO competitors for backlinks, PR, keyword in title etc. With PPC I'm more concernedabout traffic volume and cost

* I always use the Microsoft OCI (commercial intent) indicator and have a rule of thumb to only look at keywords with OCI > 90%.

* I have found some real gems by viewing keyword meta tags in the page source of ezine articles in my niche. I list them from 10 or so articles (someone else did the hard work ) and the put it through Market Samurai.

As Charles points out, the brain is still the best source for keywords. I also found by asking friends to search for a specific thing and not giving them keywords, they come up with variations that I didn't think of. My wife is particularly good at that

Hope it helps