Usually you want to keep the temperatures under 60c under load and 30c or so when idle.
Different processors can handle different amounts of heat, for example my i5-2430m likes to run at 90-95c under load (ouch, they automatically shut down at 100c) and 40-70c idle (depends on room temp), while AMD's Phenom II processors aren't built to run over 65ish C.
If the cabinet is completely enclosed then it's a horrible idea to keep it in the cabinet. It's like putting a human in a plastic bag, or a coffin alive. If it has like holes in it somewhere then it's kinda OK, but having it out in the open is optimal.
Your computer is running fine at 35c.