I've never tried liquid cooling, but I do have a Megahelem cooler on my I7. Even with only a double fan radiator, I would think that you should be doing much better than you are.
I'd check to make sure that you have enough liquid flow, and I'd reseat your water block and make sure you haven't got too much or too little thermal paste. Going too far either way with the thermal paste can undermine the best cooling system.
Just out of curiosity, how much voltage are you using to reach that overclock? I've had a couple of the I7's now, and both do like higher voltage to really overclock, but that does really crank up the watts that have to be dissipated through the cooling system!
EVGA X58 Classified MB,
Intel I7-975 CPU with Prolimatech-Megahelems-1366 CPU cooler w/twin Ultra Kaze 120x38mm, 3000 RPM fans. Two EVGA GTX295's, in SLI, with twin, 24" widescreen monitors,
3 x 2 gig Patriot Viper DDR3-1600,
WD Raptor 10K RPM 150 gig SATA HD for OS's,
One Seagate Barracud 1.5 tb, 32mb cache SATA2 HD,
One Seagate 500 gig SATA2 HD for storage,
Two Samsung SH-203 SATA DVD drives,
Silverstone Strider ST1000NV 1000 Watt PSU,
Win XP Pro 32 bit and Win 7 in dual-boot setup,
Cooler Master HAF932 case,
Klipsch Promedia 4.1 400watt sound system,
Saitek Cyborg keyboard.