I use acetone and 91% alcohol.
For the acetone, I fold up a paper towel, shake the acetone with the papwer over the top of the bottle, then fold the paper towel over and press it several times. If you can squeeze it and get a drop, it's too concentrated.
I use that paper towel to get up most of the TIM, just by lightly rubbing from the center of the die/IHS outward. Then, I do the same with the alcohol, but more sloppily, to get the last bits off. It doesn't work so good with high quality paper towels, as they leave bits behind (one thing you can try is saving napkins from fast food places). If you have some, maybe use microfiber cloths. I find them to be too much of a pain to clean them, though (but, I've only tried lens/monitor cloths).
If the TIM used was not gummy phase change stuff or greasy silicone gunk, I skip the acetone. The new Intel and AMD silver stuff, anything Arctic silver, etc., comes off great with 91% alcohol alone. If you're dealing with new stuff (say, P4E/C or newer), you can probably ignore acetone.
As for paste, I recommend Arctic Silver Ceramique. Good performance, and it's really easy to use. You can be sloppy with it, and all is fine. It's not bad for OCing (but not as good as the best, anymore), and worth it for stock configs due to ease of application and cleanup.