I am wondering if there are any Google experts out there who might be able to help me understand what I need to do to make it show up for searches in the Google and/or Yahoo search tools.

The site is at www.churchletters.net - You will notice this is a template type site and you may see some re-direct action going on. The site is at the present time quite "nichey", and does very well with my AdWords account under the Keywords of "church letter" or "church letters" as I have paid to have these terms bring up my site, and they do very well.

Question 1. Does Google "penalize" me by the fact I am paying for search terms, however, when I type the same terms in to see my site show up near the top for free, it's nowhere to be found? In other words, if my site showed up for free, I then would get away from AdWords. Do they "know" that?

My site is based on offering pre-written letter templates for church ministries. While there are some sites out there, it is minimal, and mine is the only membership based site. The site that comes out at the top when typing the above search terms is www.letterrep.com/letter_list.cfm?catid=106 which offers a large range of letters, however, only have about 5 or 6 "church letters" -

Question 2. Why is their site coming up way before mine is seen, and other sites that don't even offer any products like this bury mine?

I'm using the services of www.memberstar.com for my membership administration.

I continue to be baffled as to why, (even after placing meta descriptions, and registering a domain with "church letters" in it, my site does not come up?

I'm open for any criticism, and look forward to any input you might have.

Thank you.