You actually can't do it because limit of ad groups per campaign is 20k. But in general, I also practice this approach with up to 10 keywords per ad group and for the successful ones even one keyword per ad group.
One of the pros are more focused ads for each of the keywords, providing better targeting. Cons are of course headache with managing that much ad groups and problems with quality rank within a campaign. And yes, of course you would need to set negatives for each of them against all the other ones.
Bids and budget are not a universal rule; they depend on the industry, targeted country, etc.

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