I'm hoping to get by on stock fans and heat sinks, other than a few extra case fans for Phase 1, however I doubt that will get me by as I move towards an overclocked, multi-GPU configuration. Something will have to be done about cooling for Phase 2.
Although there seems to be some debate over the real-world advantages of water over a decent, after-market air cooling system, the consensus seems to be that water is better - if you are willing to spend the money and do the job properly.
After much reading on the subject and a little elementary physics, here is how I think it works. (If you know better, feel free to comment.)
From a physics perspective, the specific heat of water is over 4 times that of air, while its thermal conductivity is 24 times better. In simple terms, that means heat will transfer 24 times more quickly into water and a given quantity of water will carry 4 times more heat away.
The poorer thermal conductivity tends to be offset by the fact that an air-cooled heat sink has a far larger surface area exposed to the air than a water block exposes to the water. This comes at a cost, though; air cooling systems take up far more room in the case, which in turn impedes air flow - further reducing the system's effectiveness.
The lower specific heat of air seems to be what really holds it up, though. To carry away the heat produced by a hot CPU and GPU(s) you need to move a lot of air.
To expand upon this a little, let's take a fairly standard 120mm fan as an example. This fan is a fairly decent example. It has a flow rate of 54.3 CFM, or 1,537 l/m. Now, a fairly modest water pump has a flow rate of about 5 l/m. Sounds like the fan is in the clear at the moment, but a closer inspection shows that this is far from the case. Heat capacity is based on mass not volume and water is a fair bit denser than air.
At 20C, air has a density of about 1.204 kg/m3. At the same temperature, water has a density of 998.2071 kg/m3 - about 829 times more than air. Remembering that water also has 4 times the specific heat of air, we would need to move 829x4=3,316 (rounded down a little, for simplicity,) times the amount of air to carry away the same amount of heat. So our little 5 l/m water pump is really doing the job of 5x3,316=16,580 l/m of air - or over ten fans! (All those fans, moving all that air is what makes air cooled systems so noisy.)
Most cases - even full tower cases - don't have room for 10 fans, let alone enough fans to compete with some of the more powerful water pumps, which can move up to 25 l/m. (It is also unlikely that 10 fans would really move 10 times more air.) Basically, there is no way that you will ever move enough air to compete with the heat carrying capacity of water.
However, the story is not over. A water cooling system is a closed loop - so that water that is carrying all that heat away will eventually come back around again. Unless something is done, it will just get hotter and hotter, until it can no longer absorb any more heat - then your system fries. The remaining part of the equation is the ability to radiate heat away, once it has been absorbed from the hot components. Both air and water cooling systems ultimately rely on radiating heat into the atmosphere.
Air coolers rely on radiating heat from the components, via a heat sink, directly into the air inside the case and then exhausting the air out of the case, replacing it with cooler ambient air. Unfortunately, even the best case fans tend to leave the air inside the case around 10 degrees hotter than ambient. With rate of heat transfer being proportional to the difference in heat between the two mediums, that 10 degrees is going to reduce the rate of heat transfer, when compared to an external radiator used in a water cooling system. In a system crammed with foot-long graphics boards and huge after-market coolers to slow down the airflow, venting of hot air will be even less efficient.
The killer feature of watercooling systems is that they are able to carry the heat away from the components being cooled before shedding their heat.
Many water cooled systems have their radiators attached to the fan vents of the case, either inside or outside, with fans blowing air over them. (There seems to be a fair bit of debate over whether ambient air should be blown over the radiator and into the case, or whether case air should be blown over the radiator before being exhausted outside the case.)
Other water cooled systems actually have their radiators outside the case, so that there is no question of blowing heated air back onto the components being cooled, nor is there any problem with trying to radiate heat into pre-heated air.
The final clincher for air vs water cooling is that it need not be an either/or situation. You can still use case fans to vent hot air and you can still use air-cooled heat sinks on some components. Water cooling simply routes some of the heat to an external radiator, thereby reducing the load on the case fans - with the added benefit of letting them run slower and therefore quieter.
So, in pursuit of a quieter rig, with a higher theoretical limit for heat dissipation, I'm going to opt for water cooling in phase 2 - let's see if the reality lives up to the theory!