You can't burn your phone with this, I never heard of a single occasion the CPU melted for anyone. The worst thing that can happen is that your phone reboots once the critical level has been reached. And then the clock returns to normal. Don't put the insmod command into hw_config until you're absolutely sure the clock level is stable.
As for the rooting, I had the exact same problem. Just put any custom ROM on the phone and the issue is solved. With this not only you solve that problem, but get a newer system, more internal memory, faster phone blah blah...
I use FroyoPro v2.5. Nine months and no bugs encountered. I highly recommend it but there are other ROMs that are also great. That's for you to experiment