I can't remember who done this tut but it's fixed a few for me.
To prepare the steel case we use a 3/16 or 13/64 drill bit to enlarge the 4 heatsink mounting screw holes for each of the heatsinks to be repaired so the larger M5 screw can be installed. We use a Uni-bit for the task as it's first step is the 3/16ths we need and it also deburs the hole at the same time. Spacing between the heatsink and the board is critical in this repair so make sure to clean off any stray steel shavings and burs; particularly on the board side of the steel chassis as this can impact your success.
Install all the screws and use some tape to hold them in place. This makes it much easier to keep everything in place. If you choose not to do this that is fine... but when your cleaning up a bunch of washers and starting over again don't say we didn't warn you.
Let the ring toss begin! Add 3 steel washers to each of the screws, followed by a single nylon washer. It is very important to make sure you have three steel washers first and then a nylon washer last to isolate and protect the motherboard from damaged traces or shorts.
Now that everything else is prepped its time to clean and prepare the processors themselves. Start by removing as much of the old heat sink compound as you can with a tooth pick. If you cannot get your hands on some ArctiClean, then use something like goo gone and a Q-tip to remove the excess compound from on and around the processors die. Alcohol will work also but it is no where near as effective at removing the old sludge. Follow up the job with a little alcohol to remove any leftover goo gone or other foreign oils or debris. The processor dies should be clean and shiny.
Next we need to apply a thin coat of thermal compound to the die. The old adage "a dab will do ya" definitely applies. Notice in the photo on the top the amount of compound we have used; this is more than enough. You are looking for a skim coat similar to the thickness of plastic wrap. The photo on the bottom is a example of what you should NOT do. Silver based compounds can have adverse effects when in contact with electrical components not to mention the thermal compounds efficiency is greatly reduced when too much is applied.
Now reinstall the motherboard, you may have to adjust the positioning of the screws to get them to fit through the motherboard.
Now with the motherboard in place install the final two washers, a nylon one first followed by a steel one. Again it is extremely important to have TWO washers between the heat sink and the board. One nylon washer first to protect and isolate the motherboard and one steel... just to be redundant that makes two washers.
Place your heat sinks onto the screws and hold them in place with one hand while carefully putting a couple of turns on each screw to keep the washers from falling off. I place the unit on the edge of a table and from below poke my screwdriver through the tape and turn the screw in a few threads. Do not tighten any of them completely yet.
Now that everything is in check, peel the tape off of the screws and prepare to tighten them down. Turn each screw gently until you feel a little resistance. Do this to every screw before actually tightening them down. Now similar to the technique used in mounting your wheels on your car or bolting down a head on your motor; begin to tighten each bolt slowly in a kitty corner fashion making sure to evenly distribute the pressure across the processors die. Tightening down one side and then the other can result in a cracked processor die. With your large screwdriver put the final turns on each screw. You really cant make them too tight unless you actually strip out the heat sink which would require quite a monkey fisting.
Now your ready to complete the fix. Reconnect your power button assembly/wireless board. Plug your fan back in but do not reinstall it in it's original location yet; also DO NOT put your fan shroud back in yet. Connect your DVD drive so as to not get banned from Live for powering up your box without the drive connected. Now with your Xbox basically re-assembled except for the fan shroud, plug your power and video cords in and proceed.
Now for the most important part and most likely the point where the majority of people who were unsuccessful completing this fix failed.
This step requires you to overheat your GPU. Many tutorials tell you to unplug your fan and turn it on until it overheats. There is one major flaw with this approach. The thermosistor for the overheating protection of the 360 is contained within the CPU. The problem is that the CPU overheats without any airflow before the GPU is able to get sufficiently hot to "reflow" the BGA solder connection that has failed.
In order to cool the CPU but not the GPU it is again important to have your fan shroud removed. Now take your fan that IS plugged in and lay it on top of your DVD drive with one of the fan's over the top of the CPU. This will keep the CPU plenty cool to prevent it from overheating while the GPU will get smokin' hot; like burn your finger hot!
Now power on your 360. Some boxes may just work at this point because just pressure alone was enough to make the GPU's connection good. I still like to overheat even those just to make sure I don't have to deal with it again. So now you should be getting the three red lights like your were expecting. You want to overheat the unit for at least 10 to 15 minutes. The key is in the lights; as long as it is flashing the 3 red lights (1,3,4) then your are in good shape and the overheating process is working. What you DO NOT WANT is for the unit to actually overheat giving your TWO flashing red lights (1,3) at which point the 360 cuts off power to both the CPU and GPU preventing them from actually getting hot. Again is probably the difference between someone who succeeds and someone who fails.
Now that you have sufficiently heated the GPU, power down your Xbox 360 and let it cool down completely (ten to fifteen minutes should be more than enough). Replace your fan shroud; you should now be fully assembled except for the case itself. At this point you should cross your fingers and power your box back on. If all went well your should now have a working 360! Congrats!
If it did not work for you its not completely a bust yet. I suggest tightening the screws down even more and overheating yet again... some units are stubborn!
Happy Gaming for those who were successful!