Your heatsink would only feel warm if there was no fan over it.
Your temps are on the high side, but they're ok. You might consider remounting the heatsink, and using some thermal paste, like Arctic Silver 2: that might improve your numbers a little bit.
As for water cooling, it's just a bit of tubing, a pump, a radiator, some water, a waterblock to fit over the CPU. and a bit of T&T (tool and time). It's an expense, and the best approach is to set a goal (i.e. quiet PC, cool PC, overclock): it makes the selection process a lot easier.
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