Instructions for installing CM7 + overclock kernel here:
http://forum.xda-developers.com/show....php?t=1030227
Basically all you do to update is boot to recovery, clear your cache and Dalvik cache, flash CM7, flash gapps, flash Dalingrin's OC kernel. 1 extra step compared to nightlies (the kernel at the end).
I honestly haven't bothered with 1.3ghz or faster. I run Dalingrin's kernel but I use the governor on the max stock CM7 setting of 1200. That's fast enough for me.
It's certainly a lot snappier at 1200 max than stock 800/925.