After reading lot of guides now, I'm able to overclock my system up to 3GHz (333x9) with a temp of 51 C on idle and 61 C on Load (4 x Prime95) reported by Core Temp 0.95. Pushing FSB beyond 333 Mhz only reboots my PC before the Windows starts.
I want to match 800 MHz memory and the alternate method I can use is by using Memory Multiplier set on 2.5. My question is, is it safe for my value/budget ram considering my RAM should not be overclocked since it has no heat spreader. And if I can set Memory Multiplier to 2.5, what other things should I do first (such as memory voltages).
Seems like your need better CPU cooling, those temps are a little on the edge of the limit. You can buy Ram heatspreaders, you could also save up for better Ram. Ram is so cheap right now that you can get 2GB for about $100 dollars. Also what brand is the Ram? Give us you full spec's and maybe put them in your signature.
Your temps are quite high for a water cooling system. My air cooled E6600 @ 3.2GHz idle's at 28C and fully stressed @ 41C. I am aware that Quad's run a little hotter because now you have two extra cores to cool, but for a Quad your temps are high. I say your water block might not be on right of not enough AS5, can you take a picture of the inside of your PC.