After reading the thread that dagwood linked to, and then the thread over on extremsystems, I'm believing that Intel have problems with the thermal diodes on some of the 45nm CPU's.
I don't think any amount of bios updates will 'fix' it, and I think it's a CPU issue.
Whether this is a 'feature' that should work or not is open to debate, but the rumour is Intel are struggling to supply enough laptop versions of 45nm chips owing to production problems linked to thermal sensor issues, so it seems like it is something that should work properly at least for laptop applications.
There would appear to be something strange going on, as even some of those people who report core temp working normally are reporting very high temps. With a smaller process and lower voltage, that shouldn't be the case really?
Personally, I'm not too fussed, the readings from the bios are enough to go on, and probably as accurate as anything Coretemp is telling you with these 8*00 CPU's, but it would be nice if it worked!