AMD is absolutely correct. The safest bet is to use their heatsink-fan with the phase change material. It does an adequate job of cooling the CPU and runs the least risk of damaging the CPU during installation (which is real and elaborated on in my article How to Install an AMD Athlon or Duron Socket A Processor at http://duxcw.com/digest/Howto/cpu/socka/1.html). If you don’t use it and follow their procedures exactly (which are referenced in my article at http://duxcw.com/digest/Howto/cpu/socka/6.html), you will most likely void the 3-year warrantee.
However, one cannot always (or I could not always) find the retail version AMD CPU package in stock, or (the retail version at the time was priced far higher than the cost of the OEM version plus a quality heatsink-fan). I used an OEM processor and different heat sink for the computer I used in the article I wrote on installing a heat sink with thermal grease because the retail version was not available from my vendor. The heat sink supplied by my vendor came with thermal grease. That computer has been working fine for just about a year. Coincidently, it is on my workbench right now to have a second hard disk drive installed. I just checked the CPU temperature reading and it is identical to what it was a year ago (http://duxcw.com/digest/Howto/cpu/socka/6.html): One side open: Ambient 20° C/68° F, Case 26° C/78° F, CPU 44°/111°. Which is very adequate for a 1.1 GHz Athlon. Contrary to what AMD may desire, one can use grease with AMD Athlon processors if one knows how to do it and uses care. I used OEM version of the AMD Palomino CPU and Thermaltake Volcano 5 heatsink-fans in my article How to Install the EpoX 8KHA+ Motherboard because, at the time, the retail version of that processor was priced out of sight as compared to the OEM version plus the Volcano 5.
There are heat ink-fans that do a better job of cooling than some recommended by AMD. I consider many of them vast overkill for the average computer. They, and Artic Silver, are popular among hobbyist that overcook (overclock) their CPUs. I do not overclock my CPU’s and strongly do not recommend it for reasons previously stated in this and the Computer Performance forums. This policy and recommendation comes from many years of experience running a computer shop and building and upgrading thousands of computes. AMD does not recommend overclocking their CPUs and doing so will probably void their warrantee. If you do not overclock your processor you do not need the extra cooling afforded by a Volcano 7 and Artic Silver. That is, the extra cooling would be nice, but you do not need it and should not, in my considered pinion, run the risk of damaging the processor and voiding the warrantee
BTW, I don’t know about the Valcano 7 but the Valcano 5 uses phase change material. If you use Artic Silver and the Valcano has the pad attached, you will probably have to remove the pad.
Although good cooling is very desirable and absolutely essential to avoid damaging an AMD Athlon processor, it is much over-emphasized on the Internet and to the point one might believe that the objective of some is to have the latest and greatest cooling contraption instead of using their computer and processor as it was designed. Much like the hot rod/dragster thing with giant motors and practically no body that can go from 0 to (what is now a days?) 250-300 miles per hour in 3 or 4(?) seconds (and burn-up thousands of dollars worth of tires in one run). An overclocked processor with a Volcano 7 can quickly become a set of those tires. Larry
P.S. Your case looks like a nice hovercraft, and much more than you need.