Sheesh... that's not bad for stock cooling. You are running a little more voltage than what I would recommend with stock cooling. I usually figure 3.2 to 3.3 gig as long as you don't have to bump the voltage up much is getting close to my comfort limit with the retail heatsink.
You don't really need watercooling unless you really are set to get it. There are several air cooled heatsinks that will easily handle 300 FSB, but you'll have to put up with noisy high speed fans. The new SP-94 is looking good. The SLK 9000 and the Swiftech are excellent choices.
There are a couple things that can be done to improve the stock heatsink (which by the way is a well designed and efficient heatsink). Take it off and lap it. Those things are a little rough. Reinstall with AS and you should improve temps 2-5 degrees (your mileage may vary).
While the stock heatsink is fairly decent, it's the winpy stock fan that is the main problem. These are made to be quiet, not to move a bunch of air. There is a mod that allows the fan to spin at a higher RPM. Wish there was a good method to swap fans for a higher flow one. Maybe there is? Try researching that idea.