E7500 won't go over 3,5 GHz.

well what voltage do you have your cpu at? if its 1.5volts thats way to high for that cpu at that speed.....also what board do you have? it could be the board that is limiting your speed.

I have Asus P5Q SE2. The highest volt I tried was 1.36 V

All chips are slightly different - even two from the same area of the wafer. A chip with a lower VID will tend to overclock better than a chip with a high VID. Some motherboards are better overclockers than others. Some cases and coolers are better than others. And some people have more experience wringing performance out of their systems. And some of us have just been doing this longer.

Unlike any of the Core2 quads, a C2D chip is likely to reach the voltage limits before it reaches the thermal limits. So it is not surprising that at a relatively high core voltage setting, your core temps are so low.

This should be your first stop.
Core2 Overclocking Guide
http://www.tomshardware.co.uk/forum/259899-11-core-over...

Next stop should be a guide for your particular motherboard. Google is your friend.

Go through the guides. Then take your core voltage off Auto and set your memory voltage to factory recommended values. Change the System Memory Multiplier (or whatever your BIOS calls it) from AUTO to 2.00, 2.00B, or 2.00D - whichever you need to set the Memory Frequency to twice the FSB. Then when you increase the FSB, the memory clock will rise in in proportion with it. At an FSB of 266 MHz, your memory clock should be at 533 MHz.

The wrong memory settings will break your overclock. At 3.5 GHz, you are running at about 320 MHz FSB freq. Assuming that your memory settings are on Auto and you have DDR2-800 RAM, your RAM is running at (320 MHz/266 MHz)/800 MHz or DDR2/960 speeds. There's a very good chance that this is causing your overlock to fail.

Download CPU-Z to check your FSB:RAM ratio. It should be a 1:1 ratio. Running the RAM faster than the FSB freq improves performance little if any.

Overclocking RAM:
http://www.tomshardware.com/forum/251715-29-ratio-myth

Don't exceed 1.45 volts core voltage or load temps of 70 C.
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Overclocking since 1978 - Z80 (TRS-80) from 1.77 MHz to 2.01 MHz  

The problem is that I am unsure of my memory specs. I have OCZ "fatal1ty" ram..
I thought it was 1066MHz, but when I started the overclocking I found it it had been running at 800MHz all this time.. I didn't have it on auto, and I have kept the memory under 1GHz under all the testing. (Not a 1:1 ratio)

Thanks for the extensive post!

Download CPUID CPU-x. Install and open, look at memory tab

Most DDR2-1066 RAM is just DDR2-800 RAM that has been tested to run at 1066 speeds - usually at a higher voltage and looser timings. The motherboard and BIOS reads the contents of the little SPD chip on the memory module and uses that to automatically set the operating parameters for the RAM.

Unlike you and me, they do not read the advertising on the box.