This is how I put my computer together. It runs nicely so I must have done something right.
First step is to attach the motherboard on to the case tray, then mount the processor.
Above is the motherboard - it's an Abit KX7-333.
The processor drops in easily (it'll only go in one way) and is gripped by the motherboard.
Then some thermal compound is smoothed over the processor (little metal rectangle in the center) and also rubbed over the area of the heat sink which will be in contact with the processor.
WARNING
If your going to do this then read the motherboard instructions and how other people have done it.
Arctic silver instructions is a good place to start.
If you get this wrong then the processor will over heat and be irreparably damaged in a fraction of a second.
With the heat sink secured in place the tray is slid into the case.
I got the motherboard, processor and heat sink from maplin as a bundle. The case is from a local computer shop and the other bits i had knocking about.