While I agree that a VERY SMALL amount is needed, there isn't a way to say with words what size a grain of rice is.
I put a 'rice size grain' on the cpu and use a plastic putty knife (from local hardware store cost about 1.50 US) to spread it over the cpu.
In my experiance this spreading around avoids the 'holes' that can form when the heat sink is pushed down.
Most of the CPU's that we are using these days have automtic shut offs if they get too hot, so if after you do this you machine 'suddenly' stops.
Try again with the compound.
Cleaning off the old from I've used 'goo b gone' and lint free cloths and not had any problems.
Here's a news flash for you. Arctic Silver has a web site (imagine that) with the correct installation instructions. I've read many, many suggestions on this subject on Tom's, and several are just plain wrong. Go to the source and get the straight scoop.
Well the general rule of thumb is usually listen to whoever's product you're using. In this case Arctic Silver. It depends, if you are applying it to an exposed core (like the Athlon XP chips, Nvidia chips, etc) you spread it over the whole core. If you're applying it to a chip with a heatspreader (any newer cpu for example) put a small drop right in the middle, put the heatsink on and tighten it down. The pressure from securing the heatsink will spread it out.
I've done it both ways and there's really no difference in temps if you apply the stuff right in the first place. But using the "drop" method means less hassle of trying to spread it all out. So it doesn't matter if it's a cpu or gpu, it only matters if the chip has a heatspreader on it or it's an exposed core.