GPUs always run hotter than CPUs and they can handle much higher temps. There is little point in overclocking the GPU as it will be held back by the CPU unless you are using multiple monitors. If you have a load of extra cache a good move would be to upgrade to sandy bridge or wait for bulldozer. A hyper 212+ should let you get your CPU to around 4GHz.
1- GPUs can run hotter (not extreme hotter) without problems, CPUs in the other hand works better, overclock better and performs better with better temps.
2- What are your current temps?
3- Do you want overclock? How much?
4- What exactly budget do you have?
I haven't overclocked yet, I plan to do some overclocking later, but it runs perfectly as it is right now.
Should I look into liquid cooling?
I have lots of extra cash.
All of these are preference. I think you have some reading and catching up to do before you decide which route you want to go...air or water. The questions you are asking can only be answered by you and only after you get a feel of what is going to be needed for watercooling.