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Assume I have 50,000 keywords in a campaign. With 5000 head keywords and the remaining the "Long tail".

Should I adjust bids at the keyword level?

Or should I adjust bids at the ad group level?

Which strategy would lead to better ROI?

This seems to be a little extreme if you are marketing one specific type of page or site.

Generally, google recommends to have 30-40 keywords for each campaign.

Part of how PPC works is the bidding process. This factors your "Available daily budget" along with the "Average Cost Per Click" for a specific term.

If your budget is $10 per day, and you have 5000 active keywords, you are REALLY spreading yourself thin.

Google gives more weight to people with more available daily budget, you get more impressions for your most important keywords.

If you are bidding $1 for a specific keywords, with a $10 per day budget Google is only going to give you at most $10 worth of exposure at any given time..

Get rid of the excess keywords, increase your bidding amount on your top 20-30 keywords and see the results!