Cpu z showing low low for intel core 2 duo e7400 ie 1600mhz

That is most likely the power saving speedstep (or whatever they call it now) kicking in. Run a CPU intensive task (like a virus scan, or dragging a window around the screen fast) and you should see the clock speed jump back up to its rated speed.

Hello and welcome to the forums  
Yes its the speedstep which lowers the clock of your CPU in idle mode,you can disable it from BIOS if you want

Where in the BIOS would you find this speedstep?

Well for me which i have Q6600 + ASUS Maximus formula it's located in the CPU settings in the BIOS

If you are referring to your AMD system, it is called Cool n Quiet. In most cases, neither cause any noticeable performance decreases.