You should never tackle a list of keywords without first analyzing traffic and competition. Its a waste of time and resources to focus on keywords that are too competitive or dont get enough searches.
There is a specific formula I use to determine which keywords I want to focus on:
At least 1,000 monthly searches
No more than 30,000 pages in Google in quotes
No more than 10,000 results for allintitle
When you get your list of keywords from the Google keyword tool, it will tell you approximately how many searches each phrase receives each month. I dont generally use keywords that have less than 1,000 searches per month, because they dont usually bring enough traffic to justify the effort.
Next, you have to assess the competition. You want to make sure to target phrases you have a good chance to rank for, otherwise youre wasting your time, because you probably wont be able to rank on the first page if there is too much competition.
There are two steps to assessing competition. First, you need to find out how many people are using each keyword phrase on their pages. You do this by entering the keyword into Google in quotes. This will tell you how many other pages contain that exact phrase.
As you can see in the image above, the phrase keyword in quotes is used on about 6,090 other pages. This means you should have a fairly easy time ranking on the first page for that phrase.
Next, you need to see how strong those other competitors are. Google and other search engines usually give a tremendous amount of weight to the words appearing in the title of the HTML document, so you need to see how many of those pages are also using the phrase in their title.
This is done by entering this into Google:
allintitle:keyword in quotes