Ok, first thing first. Overclocking (OC) is a trial and error process. When OC, you'll increase the clock and then test. It's not something that you can set and forget. It takes some time. Overclocking is limited by two things, temperature and stability. I personally don't like temperatures above 70C and I think that's a good start. High temperatures can and will damage parts. Typically, when temperatures get too high, your motherboard will automatically down clock the CPU and will PC eventually shutdown. Stability, i.e. unstable clocks, will cause your computer to crash. Also, don't expect your CPU to be superhuman that can do anything. Each chip is different. Just because you have read that someone with the same CPU was able to get to 3.8Ghz, doesn't mean your will be able to do the same.
You will need to download a temperature monitoring tool. I suggest RealTemp. I've used it for a little while now and it does a good job. http://www.techpowerup.com/realtemp/
I also suggest you download CPUZ. It is a information/monitoring tool for providing core clock and v-core voltage.
http://www.cpuid.com/softwares/cpu-z.html
The concept in OC a Core2 (C2) processor is different from the new i-core Intels. You will overclock the C2 by increasing the Front Side Bus (FSB). The i-core processors change the multiplier. Your processor has a default FSB of 333 MHZ and a multiplier of 7.5. When you multiply those two components together, you get the core clock for your CPU. Thus 7.5 * 333 = 2497 MHz ~ 2.5Ghz. Now, I think a good first OC goal would be around 3.0 Ghz. If you decide to go higher, you can after you learn the process.
Memory. You do not want to overclock your memory. The default speed that the DDR2 module uses, is the max speed you will want to use. For example, If you have DDR2 800Mhz, you will want to take the 800Mhz and divide it by 2. That will tell you the max speed the memory module can run because memory is
linked to the FSB. That means DDR2 800 can take a maximum FSB of 400Mhz. So in your case the maximum FSB your memory can take is 533 Mhz.
Now if you had the thought that since your memory can handle a FSB of 533, you can OC that FSB. No you can't at least not without some luck and water cooling. Based on your multiplier (7.5), that would a clock of 4 GHz (7.5 * 533 = 3999 MHz). I would be amazed if you were able to do that.
Now I said a good clock to start would be 3.0 GHz. Reversing the math, 3.0 GHz / 7.5 = 400 MHz so a FSB around 400 would achieve a OC near 3.0 GHz. Now, I know the difference between 333 and 400 is only 67 Mhz. But that's a decent first step OC.
Break 1. Still with me?