Would applying too much Ceramique cause something like this? I'm not sure how much I put on there, but at the time it looked like the recommended dosage according to Arctic Silver's online install notes...
Yes, it's possible that could do it, but most times the excess squishes out. The layer of thermal grease should be very thin and very uniform. Your temps are not that much higher than the 65c normally seen in an average case on a P4 550 with the stock cooler or Zalman 7000AlCu. I've been down this path myself with a 550 altough mine was at 67c under load. It's now at 57c in the same case.
I would skip Zalman altogether, copper or otherwise, the 7000Cu is not really up to this job either IMO. A better call would be the Thermalright XP-90. Thermalright has them kitted with a decent fan now. You can also use a Panaflo 92mm BX (3 pin Rpm reporting). If you really want the cool man settup you could stick a JCM pulse width modulated fan on there. The XP90 will cost a few bucks more, but it should pull your load temps down under 60c.
Check those case fans to make certain they are doing their job as well. You may want to get a fan controller so you can be certain the case fans are spun up all the way when you are under load.
Also, I would consider
getting a phase change thermal interface. Best is if you can get hold of a piece of Honeywell PCM45. The advantage is that it applies a perfectly uniform layer that is the ideal thickness of the exact right material that Intel designed around. The are just over $1 each and one postage stamp is the cost of shipping up to 100 of them. http://www.ajigo-store.com/chomt7therin.html
All you do is lay them on the sink, or the chips heat spreader, put uniform pressure on it (I use the sink for that), wait an hour for it to adhere to the metal, then peel off the backing material. Don't rub it or it will stick to the backing material and you start over....
I'm ready for the inevitable chorus of "AS5 rocks," and I've used Arctic Silver since AS1 came out. But, my own comparisons show that Honeywell PCM45 will deliver the same temperature or lower than AS5 when both are correctly applied, but it's much easier to goober up AS5 just as you may have the Ceramique. With the PCM45 you know you have it perfect every time out. We call that verifiable qauality. The phase change material will also last much longer, not that most of us will still own our computers long enough to care.