Over optimization can affect a lot of things. The number one thing it can affect is your users. The last thing you want to do is give your users the impression your site is spammy, low class or just plain junk. Even if you get a ton of visitors the chances of them converting is slim to none, therefore your site is deemed useless. The best thing to do is to mix up your keywords with compelling content that grabs the users attention.
http://redfoxseo.com/2009/10/over-optimization-and-no-follow-tags-in-google/
The main reason people like the concept of forming an SEO Monopoly is leverage. Traditional SEO is like putting all of your eggs into one basket. An SEO Monopoly is equivalent to owning multiple baskets. The odds of a the searcher finding out about your company or service are much greater if you are running an SEO Monopoly.
