SetCPU only changes the clockspeed based on what your kernel allows -- it doesn't change anything with in the kernel, nor does it actually enable the overclocking to occur. In order to do that, you'll have to use another program.
https://market.android.com/details?id=com.jrummy.droidx.overclock&feature=search_result and
https://market.android.com/details?id=pt.com.darksun.milestoneoverclock&feature=search_result are two options -- I personally use Milestone Overclock, because it's free, but I know a lot of people who use Droid Overclock; I think it allows for faster overclocks. There might be one or two more, but these are two that I know for-sure work.
These programs work by enabling a kernel module -- basically an add-on for the kernel, something that sits outside of the boot partition and 'plugs in' to the kernel, which is then a work-around to the fact that the kernel can't be changed. Once these programs are enabled, you'll be able to use SetCPU to change the clock speed on the phone.
You will, of course, need root in order to use these programs.
