OC'ing is much less an art these days as technologies exist to prevent you from making your computer go boom. The horror stories are from idiots that didn't do their research, I'd bet most of them are products of inbreeding. You're doing your research which is good.
You have a Pentium 4C which clocks down the CPU automatically to prevent it from burning out. The logic is built into the CPU.
You can also set a max temp in the BIOS that will shut down your computer if the temps exceed a predefined threshold. You can also set the BIOS to shut down the computer if it does not receive a signal from the CPU heatsink fan... for example if it burns out which means the CPU isn't getting any active cooling. Unless you have a mega heatsink like a Swiftech, Thermalright or Alpha, it isn't a good thing to have happen.
Only real way to directly fry your CPU is to overvolt it. In some cases increasing the voltage (do it in .25V steps or .5V, depends on the BIOS) allows you to push your chip higher. Makes the CPU run hotter but stabilizes the signals in the chip. FYI do not push the CPU voltage over 1.7V or you will fry it.
You can also fry your system if you have a cheap/underpowered PSU. I think you ended up with a decent one.
The motherboard you have allows you to specify AGP and PCI bus speeds. Make sure you lock them @ 66MHZ AGP and 33MHZ PCI. I would manually specify the bus speeds rather than letting the motherboar dynamically adjust it. That keeps you from frying devices hooked into the motherboard.
Follow these instructions on how to apply the heatsink compound to the CPU. You want to do a good job since this material ensures optimal thermal transfer between the CPU and heatsink.
You might not have this product, but the application process is the same
http://www.arcticsilver.com/arctic_silv ... ctions.htm
Download this program to monitor your CPU temps, voltages etc... if the number look too high, drop down the speed of your front side bus.
That's pretty much all you need. If you did get a cheapo PSU, I'd keep an eye on the voltages.
Motherboard monitor will also allow you to poll or log measurements over time, so you can see how you did in a specified time period.
Be sure to burn your computer in for about 24-48 hours before attempting to OC it. You can run Sandra in loops or 3dmark as well. Also could do folding at home.
As long as you're smart and don't attempt to RMA a CPU that you fry from overclocking, I don't think it's a bad thing. Bottom line you get a process or 1/4 the price of the manufacturer's high end part, overclock it and save yourself a fair bit on money.