The pump would be the culprit. Lapping the block might help some, but probably very little.
I don't believe that the CPU block is at fault because it's aluminium. In Alu vs Cu (copper), the difference is there, but it shouldn't be that far off.
I think that the WB design is also a big factor, and that the only way to compensate for those two limitations, would be with an increase in flow, which in this case, obviously can't be had with this pump.
I think that the pump should be the first concern.
Recommendations: get another pump. Check out your local pet store, but lookup the "pump roundup thread" first:
http://forums.procooling.com/vbb/sho...&threadid=3650
[edit] off-hand, I'd go with a maxijet or a Danner (with mod), if price is an issue.
Guys, there's something that we've ignored here: it's an aluminium waterblock, and a (copper?) heatercore. I know that we're only at the testing stage, and that no additives have been added, but that's going to have to be addressed.