Would this work in MDD 1.25x2?

HI-

Welcome to Discussions!

I've seen a few reports involving Corsair RAM, and people who try to use it in a Mac. Reports are usually of problems.
It's not Mac RAM, it's PC RAM, and value RAM at that. There is a chance that it will work, but a greater chance that it won't.

Can't you just get a guaranteed Mac compatible replacement from Crucial, and install your own heat spreader?
Ultra Memory Aluminum Cooler
VANTEC ICEBERQ DDR-A1A Aluminum Heatsinks

Adding a PCI slot cooler would be a good idea to help your cooling problem:
http://www.xoxide.com/thermaltake-slot-cooler-uvblue.html

I'd hardly call the ram I linked to value

Value RAM means the makers budget line. It is over-priced, though.
Typically, this type of RAM is made of high density chips, which do not play well in Macs.
The problem with the Corsair, and other PC "performance" memory, is the timings and voltage typically need to be adjusted in the BIOS for a given machine. There is no capability to do this in a Mac, as it is all automatic, firmware based.

what do you recommend?

Anything that is guaranteed Mac compatible.
If the RAM doesn't have the proper EEPROM coding, the SPD won't be able to set the RAM performance as is required by the Mac firmware.
This is why the RAM should be specifically stated as in being "guaranteed Mac compatible".

The prices at OWC are very good, and they sell only RAM that is Mac compatible.
Mac-Pro also has 1GB DIMMs.

I used PCI coolers and they barely do anything but make noise.

What was the CFM rating? A 20-22CFM unit won't do much,.
You may want to try replacing the case fan (120mm x 120mm x 38mm) whith a higher CFM rated fan. That would mean greater than 90CFM.
It would also be worthwhile to remove the heatsink of the CPUs, and replace the thermal compound with Arctic Cooling MX-2.

I have arctic silver on all my heat sinks (processor and video card) and I think this is why the heat is killing the ram. The MDD mounts the video card upside down and blows hot air on it (aftermarket oversized zalman heat sink) and the heat sink for the processor is very close to one of the memory slots.

Yeah, the placement of the memory between the CPU and the AGP card really make for a tough climate, especially with a hot graphics card (and of course, the CPUs are notoriously hot).
Further, there isn't a way to use an exhausting VGA cooler.... many design problems to deal with.
This is why I suggested the PCI fan, to remove some of the heat that is being produced.

The case has the original Delta fan that has a much higher CFM (and is noisier) than others found on newegg or other sites I searched.

I think that's 97CFM?
There are higher volume fans. The Scythe Ultra Kaze 3000rpm fan has 133CFM, but also increases static pressure, which is an aid in cooling.

PCI is not the area I am targeting though, it is more the area between the video card and the processor heat sink.

This I understand, but, we return to the design limitations of the machine.
I still feel that removal of the heated air is something that can be of benefit. There are many different configurations available for heat removal. See System coolers.
I have seen user mod's, which attach fans to the CPU heatsink, and direct the airflow perpendicular to, or away from the memory slots. This is a fairly common mod here in Japan.

As for the suggestion on ram, is there a specific brand/type I would be better off with? pc2100, pc 2700, pc3200?

The spec is for PC2700, and the way the memory controller and firmware work, there are no gains to be had with PC3200. PC3200, however, is backward compatible.
As for brand, I can't say as if that will help with heat.
The OWC Techworks or the Crucial (Micron) memory is always considered to be of high quality.
BTW, here are some more Memory coolers.