Cooling problem on x1900xt

So, I've had this problem for some time now but I've just been reluctant to address it.

Back in September ('06), I bought 2 new coolers: a mini-typhoon for my cpu, and a zalman vf700 for my vpu. I was going to buy the vf900 but Fry's was all out. I bring the stuff home and go to install them, but I realize that only one of them came with a VERY small tube of cheap thermal paste. Well, I, not knowing how much to put on, decided to just make it work and stretch the paste to both surfaces (cpu and vpu). Things seemed to work and I was pleased with the decrease in sound and heat (even though I hadn't ever done a heat test on either previous to the switch).

There was, however, one direct, noticable change: I could no longer overclock my graphics card. If I increased the settings the slightest bit, it would get extremely hot and eventually become unstable (within 20 minutes). So, since then, I've just left all the settings the way they were because I like my computer stable more than I like it uberpowerful (though I would like to have both if possible).

Just the other day, I was looking through Ati tray tools and noticed that my card was actually underclocked (for 3d mode I mean). Naturally, I thought nothing of it and tried to push it up to at least stock numbers. Dead. I have to restart my computer because ATI vpu recover doesn't get it back. I try again. Same results. This really sucks because I feel like I paid for half my real card (especially since I went out and bought a new vpu cooler in the hopes that I would be able to overclock it some more!) Right now, my vpu runs around 53c idle (not sure about under load because it keeps dying when I scan for artifacts).

So, I guess my questions are thus:
1) Is it just a thermal paste issue? and should I just go out and buy some Arctic Silver?
2) Is it a vpu cooler problem? (I vaguely recall reading something on a forum that said that the vf700 doesn't overclock well, but I'm not sure) Should I just order a Thermalright HR-03 and replace my old one?
3) Is it possible I did something wrong when installing it? It was my first time replacing a stock cooler and it's possible there was something I should have known about before but didn't.
4) Could somebody post/find some pictures of how much paste you need to put on it? I know everyone says 'a thin layer' but that's more vague than government work. I need a visual image to tell me what I'm doing.

Thanks

edit: I just finished running scan artifacts for 10 minutes and it topped out at 79c. I suppose that's not that bad, but this is at stock (500:594)

1. Get better thermal paste.
2. Clean off old thermal paste.
3. This time only put a PEA SIZED amount on the GPU.
4. Spread it until it is paper thin and covering the whole serface.
5. Re-apply cooler.

Edit: You might have put to much or too little thermal paste, causing the GPU to overheat and throttle-down.

Well first of all, It takes time for the thermal paste to react. your temps should be high for a few days then it will go down. Just make sure u have good contact with the Cooler and GPU.

The big guy at artic told me not to use artic silver on video card ram - he said something about it can conduct high requency radio waves - i think - it was almost a year ago.

so use the ceramic paste on the ram and silver on the gpu

Update:
Okay, so, if you say that it's supposed to be worse for the first couple days, then this is good. I bought some AS5 and reapplied some thermal grease and it's currently idling at the same temps (low 50s). It's a good thing I had noticed this because when I took off the heatsinks I noticed that it looked like there almost wasn't anything there. Apparently, I had barely applied any grease before. Hopefully (fingers crossed), the temps will drop over the next couple days...

I wouldnt wory about those temps. When i got my x1950xt (similar, not the same) my card would run 70 idle at 90 at load. Those ati cores can take a beating, up to 100 or somethin. After i messed with the fan controlls 681/999 at 54idle-70load(stock cooling). I think you have nothing to be scared of. Also i heard that the x19xx coolers were pretty cool(but loud).

1. Thermal paste is SUPPOSED to be spread as thinly as possible, but evenly.

2. When I tried the VF900 I found it didn't really cool any better than the stock cooler, it was just quieter. The KuFormula VF-1 Plus and Thermalright HR-03 did a really good job though.