CPU Permanently Lost Speed?

Yup, Thermal Compound is really important. take this as an example:

You take a shower, but you wear the same underwear again.

You need to clean the old thermal compound and put on some new. and you have to be sure that the heatsink/fan is properly seated on the motherboard, and also the airflow on the case, the less air you have in there, the less heat is going away

Ok but how do I make my processor run normal again?

You need to clean the old thermal compound and put on some new. and you have to be sure that the heatsink/fan is properly seated on the motherboard, and also the airflow on the case, the less air you have in there, the less heat is going away

^ Like that :)

And if you want, you could disable Intel SpeedStep in your BIOS to stop the processor from underclocking itself and have it running at 100% of its speed (2.80GHz) all the time

Where would that option be?

On some BIOS, it's called EIST. check for that too. if it's enabled, disable it. although you wont gain anything from it, because it only keeps the processor at its maximum. :)

I disabled it, but BIOS still shows core running at 1.60

Haha got it! CPU clock was running at 6, changed it to 10.5

(What it used to be) and fixed!