Yes you can manually overclock over 1Ghz. If you're lucky and dont care about the warranty you can hit 1.2Ghz with some tweaking..
Good powersupply is a must.
Dont worry about overheating, as when it hits 85C (which wont happen) it downclocks automaticly.
As for heatsinks; you dont really need one.
If you don feel paranoid, you can stick a small heatsink to lan chip, as these tend to be a bit hot when under load. But if you have the new rev2 board than even that is not need, as 1v8 bug (that causes lan chip to be hot) is fixed.
+°´°+,¸¸,+°´°~ Everyone should have a taste of UK Raspberry Pie =D ~°´°+,¸¸,+°´°+
, SoC @ 1225Mhz
, 256MB Ram @ 550Mhz
, 16GB SD-Card