I am looking for recommendations on CPU's. I have a budget of $300 and the CPU will be overclocked. It will be used in a computer designed for gaming. I will be cooling the unit with a water cooling kit.
Check the hardware review sites like tomshardware.com and anandtech.com. They often have tables comparing price and performance of various CPUs.
I would personally go for Core 2 Quad Q9450 if you can find one.
I also wouldn't overclock it — you won't need it because they are already great performers, and more important 45nm chips are more sensitive to higher voltages and overclocking strain.
If you still insist on overclocking you do it at your own risk. At any rate, stay below 1.400V for VCORE at all times, and beware of high VTT. Here is an article with usefull guidelines for 45nm parts overclocking, but please remember that my personal recommendation is not to overclock because the gain is usually not worth the risk.