If the water is being chilled you're still likely to get condensation on the waterblock itself which can drip onto the back of the graphics card, since the cpu is right above it. So you're still gonna have to insulate the cpu, mobo and waterblock anyway.
Here is a guide on installing and insulating a tec.
Other than that, are you planning to do some extreme overclocking? A tec system consumes alot of electricity, which amounts to high running costs if it's your main system and you're running it 24/7. Not to mention it's alot of trouble putting together and you still run the risk of condensation if there is a flaw in the insulation. If you've set you're mind on a tec and it's the first time you doing a project like this then it might be better to do it on your old p4 before trying it on your prescott.