Well, the confined area inside the case might hinder your ability to put the heatsink on. Its much easier to do it out of the case, but it can be done. I put my xp-120 on the second tome with the mobo in the case, bit it was a bit of a challenge. It was much easier the first time when i did it out of the case.
Stupid question and hopefully obvious, you did clean the cpu well with alcohol or something before installing the new hsf and thermal paste? Also if you not put even pressure down by corssing screw patterns a little at a time it may be raised ever so slightly on one corner or side.