Soaring CPU temperatures!

Are the temperatures you mentioned above individual core temperatures or tCase temperatures. I recommend you read CompuTronix's excellent guide http://www.tomshardware.com/forum/ [...] ture-guide . The most important part for you right now is this:

Scale 2: Quad

Q6x00: Tcase Max 71c, G0 Stepping, Tjunction Max 100c, Vcore Default 1.372, TDP 95w, Delta 10c

-Tcase/Tjunction-
--70--/--80--80--80--80-- Hot
--65--/--75--75--75--75-- Warm
--60--/--70--70--70--70-- Safe
--25--/--35--35--35--35-- Cool

What this means is that the maximum temperature your CPU is rated to operate at is around 70C (or 80C for the hottest individual core). Your BIOS temperature is (if I'm not mistaken) the tCase temperature, which is 10C higher than what the maximum temperature it should be operating at is. Until you get the problem solved, it would be wise not to play any games until the temperatures are lower.
As for what's causing your excessive temperatures, you should first try reseating the heatsink. The Intel stock heatsink can be a pain to get on, and even one mis-latched pin can cause problems. You might also consider getting an aftermarket heatsink.
As for oils impeding heat flow, I wouldn't worry about it. At the temperature your CPU is at, especially a g0, it's probably something else. As a temporary solution, I'd recommend going in to your BIOS and manually turning Smart Fan off.

Glad you got that working. 30 degrees C idle is an excellent temperature (though as you can see in the guide some temperature readings can be misleading, be sure to follow CompuTronix's calibrations section to make sure it's accurate). If there's anything about the guide you don't understand, try making a topic in the Overclocking forums...he seems to troll there more often than here.