I would monitor the temps after the exchange, just to be sure, but everything seems to be in order. You should see a big performance boost, but it's odd in itself XP was running slowly on that machine. What did you install on there? How fast is the hard disk in that machine? With its specs, it should fly through XP and get through Vista without any trouble.
I would put Arctic Silver on the CPU when/if you get the new one.
I just received my lenovo t500 with the p8600 cpu. it handles vista like a charm. i thought about reverting to xp too but the fact that MS already dropped its support for XP holds me back. what chipset is in your notebook? once you find out what chipset you have, you can go to intel.com and find out which cpu it supports.
ibm generally have pretty good cooling. Although you might consider staying within a 25w TDP cpu as it will use less battery juice and run a bit cooler.
So any Core 2 Duo with a 800mhz FSB should work. Lenovo only certifies up to 2.6 GHz (Which the T7800 is), though, so the best possible, procesor without going over spec is the T9500 (basically a 45nm T7800 with 2MB more cache, but costing about $200 more).