Yes, Water cooling would be helpfull with this system. The fsb 12 and lockup thing could be heat also it could be the Asus board are not the best for OCing I dont know yet.
In the bios disable fastwrites, also if you have a option of system performance in the bios you want fast, not turbo or ultra also in bios if option is available for halt on errors, enable no errors, or always on or could be labeled power on option. Now that this is set trun the fsb to 11 and the cpu multi to 200 and boot, if everthing is ok then start the oc by 1 or 2 mhz at a time. Ocing takes time its not like you crank it up to the max right off ,little at a time, play with the system for a bit and crank up more, saying that I use 3dmark 05 to test the output for ocing but you would'nt be able to bench with this becase of heat and that is where the water cooling would help,.