CitrusHD, you could try the RROD fix kit from ifixit. The kit is strictly providing additional pressure on the GPU/CPU to try to close cracks in the solder joints ( as well as reconnecting the bumbs, long story). You most likely have issues with your GPU processor. It is a flip chip design and the issue could be the solder bumps between the IC and the substrate.. Combining this with a reflow with a heat gun may just complete a good repair. Check on here step 49 will explain it. Check on here for the reflow guide. Also "remember that all that this kit is trying to accomplish, is to close cracked solder joints. Most of the time the extra few pounds of torque provided by the kit, will close those cracked joints. It is not a permanent fix, nor is it a sure thing either. It all depends on the individual logic board and the damage to the solder joints as well as the chip itself I strongly suggest a reflow with this kit. The chances to be successful is greater with a combination of RROD kit and a reflow. Of course, a permanent fix would be a total reball. for a reball to be done, you will need the stencil, a rework machine as well as the proper reball temperature template, and a new processor. If you do not have those tools, you can not do a reball. In that case you need to find somebody that will do the repair for you. Yes, you do want to replace the thermal paste as well. Contact the game console guru on here and see if he can help you out.
Citrus HD here is a very "quick and dirty" explanation of what causes most of the RROD. It is not always a failure of the solder balls which connect the Flip Chip BGA package to the motherboard. It does happen and you can see why [ http://www.bunniestudios.com/blog/?p=223|on here] More commonly however is that the failure is due to the chip design itself.
As you can see the "bumps' are what actually connects the die to the substrate to make the chip complete. If these bumps fail the die does no longer make contact either he substrate and thus no contact with the circuit board. The chip has failed.
Here you can see the space where the bump has failed and no longer makes contact. We are talking microns of space here. So a bit of pressure on the top of the die potentially close the gap. Same with a reflow, it may allow some of material from the bump to reshape and starting to make contact again. The heating of cooling of the chip during use is what will eventually cause it to fail again.