Your memory is set at 800 mhz standard because the frequency depends on your fsb, 266 mhz quad-pumped, and a multiplier. The standard memory-fsb-ratio on C2D is 266 mhz fsb and 800 mhz memory but you can set it higher in the BIOS.
Some people would advocate that running the memory and fsb 1:1, that is for example at 1066 mhz with the fsb at 266 quad pumped, which is basically the same as 1066 mhz. If you wish to overclock it's probably better using the 4:5 multiplier (which is the standard one) as your memory will probably bottleneck you before the cpu does (I doubt your memory will take 1333 mhz though I'm no expert on the field, while the C2D should be able if you overvolt a bit).
As long as you're on stock voltages and have reasonable temps (<70 degrees measured in core-temp or Intel's TAT should be alright I think, that's about 52 degrees in a tool like speedfan, at least on my mainboard) there's nothing to be afraid of. I personally hit a ceiling somewhere around 3.1 ghz on stock voltages, and since I'm probably not cpu-limited anyway I don't bother going further than 3 ghz because of the extra heat and noise (actually I have mine on 2.4 right now).
I've heard overvolting substantially can cause 'electro-migration' causing your cpu to loose the ability to overclock over time (>1 year I think), but I don't know that much about it.