Thanx all for your support. As told by you i disabled spread spectrum. And for editing the multiplier i had to disable Intel EIST option. After that i reduced the multiplier to 8 and left cpu-fsb freq. as it is then system ws stable and it underclocked very well. But when i tried to overclock it by keeping multiplier to 8 to 11 and increasing cpu-fsb frequency it didn't started.
These are the specs of my BIOS in CELL MENU when i again set it to default values. Please tell me what shall i increase or decrease to overclock it to atleast 3.5 GHz. Also it's worth mentioning here that my BIOS gives the option to edit CPU multiplier only when i disable Intel EIST.
Current CPU Frequency 2.66GHz [266x11] (Greyed)
Current DRAM Frequency 1066 MHz (Greyed)
CPU Specifications [Press Enter]
Intel EIST [Enabled]
Adjust CPU FSB Frequency [MHz]  (Min: CPU Default
Adjusted CPU Frequency [MHz] 2926 (Greyed)
Memory Z [Press Enter]
Advance DRAM Configuration [Press Enter]
FSB/DRAM Ratio [Auto] (1:1.50,
Adjuated DRAM Frequency [MHz] 1066 (Greyed)
Adjust PCI-E Frequency [MHz]  (Min: 100 MHz,
Auto Disable DRAM/PCI Frequency [Enabled]
Spread Sprectum [Enabled]
I am also giving Min and Max values for whichever terms my BIOS displayed. Also, i had written "Greyed" for the fields which are read only in my BIOS.
Please help me out with this, i will be really grateful to you all, specially "riiders" and "fingers".