Yep, that cpu is faulty as heck. Call Intel or contact the store. Did you purchase the computer a long time ago or recently?
Also, when you installed the CPU, did you damaged any pins/contacts? Maybe that's the reason, you should check the pins on your motherboard and the contacts on your CPU, just to be sure.
If a pin is bent/broken, you should notice right away (look carefully, it will be there). If this is the case, PROBABLY, a contact on the cpu will be burnt.
Like this, or worse:
-snip-
You can't probably see it very well, but it has a darkened corner.
That's my CPU, actually. I accidentaly broke two pins on the motherboard without noticing (they are EXTREMELY delicate), and while the system was stable, you can't really trust a thing like that.