You do not need a water coolign system. You will need a CPU cooler which is better than the stock one that came with your processor. I am a particular fan of the Zalman all-copper CNPS line. Not only do they look cool, but copper is a better heat conductor than aluminum and they work extremely well. Recently, a couple of them were on rebate at Newegg which brought the price down to under $30. Unfortunately, it looks like those rebates have expired. Keep your eyes open as those come and go with regularity.
Another all copper cooler is available from Thermaltake. Newegg has one of these with an open box discount:
http://www.newegg.com/Product/Product.aspx?Item=N82E16835106102R
The regular priced one is here:
http://www.newegg.com/Product/Product.aspx?Item=N82E16835106102
For specific information on over-clocking, I strongly advise you poke around MaximumPC, Tom's Hardware, AnandTech, and Overlcockers .com and .net (two different sites). Not only will you find loads of inavluable information, but it is common that you will find one or more people who have already done it with the same motherboard and CPU as you and have fairly detailed reports on how far they were able to tweak it and how they went about it/the exact settings they came up with.