Firstly, before you can overclock, you need to be rooted and have a kernel installed that supports overclocking. Most custom ROMs come with a custom kernel as well.

I have used both Bumblebee 2.4 and Harmonia 1.5E. Both can be overclocked (or underclocked, or both).

I use No-Frills CPU Control. It's free. Just doesn't look as cluttered as SetCPU to me. And it works great.

You set your Max and Min CPU speeds, and the governor profile that manages the speed. So you can set it like 480 minimum, 806 maximum (which is how I have it set), and the governor will throttle up and down depending on whether you need the power or not. You can also set the Max and Min to the same, like 806 and 806, if you want to just straight up overclock all the time.

First thing is root. Then install Bumblebee or Harmonia ROM, then play around with No-Frills. I haven't gone passed 806 max, but I've had absolutely NO trouble at 806. And it's very snappy, and any occasionally homescreen lag that might happen from time to time is pretty much gone when I'm running at 806. I have read about people getting up to 864 as well (this is the max the OV's cpu will do I believe). But 806 is so responsive, I see little reason to push it any further.

 

Check the all things root sub-forum. There are a number of threads there about over clocking.

 

I would be very careful about setting the min. speed to high as this is were the phone idle's. Too high and the battery off charge time will go down,and the battery temp will go up. The highest I would go is no more then 480 on the min.

I run 480MHz min-787MHz max. with a custom ROM. I get 1 and a half days battery time and my battery has never been over 41C. in the heat of the day. At rest it's been as low as 19C.