It can be dissipating 80 plus watts immediatly at turn on.
Difficult to see how "messing up" the thermakl compound can cause such drastic effects.
The thermal paste should be a very thin coating on both the heat spreader of the CPU and the base of the HSF. If the HSF is one that came with the CPU in a retail box, it will hold the CPU temp at a safe level [not very cool, as for overclocker types, but safe], that is assuming that the devices are mared together properly and the fan is running at the correct speed.
The other requirement [that should have come on a note with the CPU] is that the internal ambient air of the case in the vicinity of the HSF be 38 C or lower. Shoot for 32C really.
For a better cooler look for posts by someone called ozos [or osoz] where he gives some recco's.
Also try to be certain that the temps you are reading are valid. The CPU should have shut itself/mobo down when you hit 70 C, so maybe your temps are not valid, although I would suspect that somehow the HSF is not adequately clamped to the CPU. That has to be a very tight connection.
Only other thing to think about is that Arctic Siler is an electrical conductor as well as a thermal conductor. Make absolutely certain that none of it gets near any electrical contacts.
CPU Heat problem
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I've just recently built a new P4 3.0 LGA775 computer. When I first installed the HSF I messed up the thermal compound (was running temp upwards of 90) so I bought some Arctic Silver 5.
The first time I replaced the thermal compound it worked pretty well. I used Isopropyl alcohol (99%) to clean off the HSF and the CPU. I then applied some AS5 to the bottom of the heatsink, rubbed it around with a plastic bag, and then wiped it off with a paper towel (I have been told by many that this is a good way to fill the valleys on the HSF to allow for maximum contact). Then I applied a dab of AS5 to the CPU and mounted the HSF. I started out with an idling temp of 45, then it gradually moved up to about 55 and stayed there. My active temp was around 65-68 for a while, and gradually moved up to 70. When I played Half Life 2, it went up to 75. This was good, but still too high, so I decided to re-do the AS5.
So I did it again tonight, followed the same procedure...and 5 seconds into booting up I had a temp of 90 C. I turned it off right away and redid the AS5. Same thing happened, 5-10 seconds into booting I had a temp of 90.
So...any ideas? I didn't think it was possible for the CPU to get that hot right off the bat, and I definitely can't run at those temperatures.

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