Make sure you clean both the heatsink and the CPU before applying new thermal paste. I use Goo Gone or a similar cleaning solution to wipe the old paste off the chip and heatsink until both have a shiny, paste free surface. Then re-insert the chip in the motherboard and apply a small amount of thermal paste and spread it thin to cover the entire area that the heatsink presses up against. Then in one solid try, press the heatsink straight down onto the paste and clip the four locking clips, try not to let the heatsink slide around while you're clipping it in because it can mess with the paste and smear it around or make it uneven. Make sure the fan is plugged into the CPU fan 4-pin connector and power on your PC to the BIOS. Check the temps in BIOS (CPU temperature is listed under PC Health) and make sure your voltage is set within a normal range (for the stock heatsink I wouldn't recommend over 1.2V or so unless your chip is unstable, mine ran hot on the stock cooler even when undervolted, it hovered around 75C board CPU temp (cores were probably above 80) under full load. If the voltages have been messed with, try loading the defaults to clear any voltage modification. There is a green LED above the red one that indicates a slight CPU over-voltage (mine is lit, running at 1.31V), that should not be on when using stock cooling.
If you can, I would recommend buying a better heatsink, I used the stock one for a month and decided it wasn't very good for 24/7 folding and I wanted to overclock, so I switched to a Corsair H50 water-cooler. There are many cooling options (air and water both) that work well for the i7, you should consider a better cooling solution if your temps stay high. The stock cooler should not run anywhere near that high under no load though, mine ran about that temp under 100% on all cores load. With the H50 and 1.31V/4.12GHz, my cores run around 70-75C and the board's CPU temp is around 67-72C depending on room temperature, the red light is sometimes on (the red light turns on when the board temp is above 70C).