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Well check the wiki here on TMO. There are people against OC and in favor of it. Currently I'm on KP49 and on DSP profile if I dont forget to turn it on generally the stock settings are good for me. The profiles like ULV, XLV... are supposed to save battery and give performance but it is said that the calculations in it are wrong/not perfect and should be tweaked for each device. Sometimes in daily use I think that OC is overated. For answering cals and sending sms 600mhz on standard stock settings is OK.

meh id rather stick with stock kernel and stock oc, my phone kept dicking up with power kernel, not saying it isnt good, just phone went to wank. but stock runs fast

ULV, XLV, etc have nothing to do with overclocking, except that the kernel that allows you to overclock if you want to (I do) also allows you to use these settings if you want to (I do).

The reason that different N900s have different best settings has nothing to do with whether the calculations are wrong/not perfect as you said, but because N900s are not identical and the only way you can find out what is best for your N900 is by testing it.

Those profiles have lower voltages than stock, their only differece is that each has a lower voltage (for each frequency than the previous one).
Lower voltages mean less power consumed by the cpu (you know that P = V*I, don't you?), and so, lower cpu temperature which reduces the risk of damage and aging of the cpu, and a expected longer battery life.
They are also deprecated for kernel power 49 and variants. The reason is that the cpu has a feature called SmartReflex (google it) which should adjust the voltages dinamically to the minimum possible to get the best power savings. Unfortunately, Nokia didn't implement correctly the driver for SR and it caused inestability and random reboots, so Nokia finally disabled SR leaving our devices with less than optimal voltage profiles, but stable.
Our dear TMO member Freemangordon realized that and took the work of reading TI's documents, did the right calculations and put them in the SR driver for kp49, correcting also the overclocking frequencies in the process.
So with kp49 and variants, the set of OC frequencies is different, and SR no longer causes inestability (on most devices at least, although there are a few reports of inestability and probably kp50 will have revised calculations), so it is better to enable SR and let the device calculate it best voltages. There is also a new overclocking profile "dsp" by Freemangordon, which has SR enabled, the new corrected frequencies and the optimum dsp overclocking for the new feature of recording at 720p, also kindly brought to us from the N9 by Freemangordon.

...and here.

1. I don't know why the ideal's min. freq. as 500 is saving power... Why isn't it 250? Could you explain?
2. Should I manually enable SmartReflex in e.g. QCpuFreq to make it work?

Also note undervolting too much can cause crashes, system instability and corrupt data. Bear this in mind if using XLV ULV and Starving especially at lower frequencies.
SR seems to work nice for me at the moment on KP.

The idea behind the 500Mhz in ideal AFAIK...
..is the process is done quicker and the system hits idle quicker.
Saving battery in the process. I would think it depends on your usage, tho.

Exactly, if I am listening to hours of MP3s is it better for the n900 to sit at 250MHz or 500MHz?

is there any chances of damaging my cpu or board with underclocking ?