Software overclocking usually doesnt work very well. You need to read up on overclocking and learn your bios. Also, an arctic freezer pro should handle the 6550 well enough.
I'm surprised noone has told him to disable EIST and C1E. That'll solve that speedstep problem your talking about. I've got my father's e6550 running 3.4 so you still have some room left.
EDIT: i had some questions here but i read up on them
People where saying that EIST and C1E can cause crashes with overlocking (what i am probably experiencing trying to clock past 2.8 :/)
But for the moment @2.79 is fine and until i get my better cooling, i like that my idle temp is a bit cooler than it would be with EIST and C1E off. Besides that i don't see any other reason to turn it off until i clock past 2.8, or do you no of any reason other to turn it off?