The metal plate over the CPU has a heatpipe going to a chunk of heatsink sitting under the HD tray/bay/mount. There is just not enough room for a better heatsink. Better thermal compound would be good though. Was it here that I mentioned the last time I took the heatsink off a 700Mhz eMac? idk, I might do a search later to check.
Also, the eMac's fan is some screwed up proprietary funky shaped specially designed shit fan. From what I have seen you would be hard pressed to replace it decently.