Probably the most important step, initial research is let aside by many. This can make or brake your website.
There are plenty of tools, I use Keyword elite 2 and Market samurai. For those not willing or need to spend money on this one(you should if you plan on having more sites over time) there is traffic travis -free, and of course the Google kw tool -actually I use this one a lot beside the tools.
You should look for competition in terms of numbers - you don't want anything over 50.000 competitors if this is your first site/blog. Also you need to check the main/biggest competitors - look at their stat using the free seo quake firefox plugin- PR, backlinks and so on. If you find that they have a PR over 5 and lots of backlinks, then this is not your game...
Alway try to find small niches in your main interest - e.g wooden car toys is a sub-nice of the car toys niche. With patience and perseverence you can find one no matter what your interest is.

Let me know if this was helpfull :)