1: One of Google's major weaknesses is the concentration of its revenue around a few large websites. Having the most popular advertising network on the web (AdSense) is an important asset for pretty much anything else Google wants to do.
If what you said were true, the greatest threat to the Google Search page would be a strong AdSense market with high quality content which everybody finds using organic search.
2: AdSense does not compete with Content Network because it is long tail. The value for advertisers is in reach and diversity.