I'm a huge fan of copper heat sinks. I still have two that are empty and waiting for the right diode. As far as using thermal compound, if you mean thermal adhesive, then, no, don't use that at all between your module and the heat sink. I personally like a thermal compound I made myself using 50% silver heat sink compound and 50% synthetic diamonds at 0.1 microns to 0.01 microns. The reason is that diamonds have a thermal conductivity of 5 times that of elemental copper. Plain silicone is only slightly better than air and silvered isn't much better. But, I only use it in hosts that seem to have a poor, or sloppy hole for the module as it only helps to fill in the cracks that are microscopic between the heat sink and the module.
Edit: I'd also use a copper module instead of the cheaper nickel plated brass as they don't dissipate heat as well. I quit using the brass ones altogether and only use copper now, even though I still have about a half dozen of the brass ones left.
I don't think it was anything that I ddi wrong although there's always a good chance that it was my fault. I think It might just be an unstable diode in general. Oh well I had fun while I had it. 
( do not listen to my statement because it's just my assumption). 
