I've googled this quite a bit, but I haven't found a way to make the governor speed up the CPU speed to 100% instantly if CPU usage goes above 70%, and wait for CPU usage to be less than 70% for more than 10-20 seconds before scaling down.

What is an easy way to do it?

Basically I want a governor with fast up and slow down action.

That's because your Linux kernel doesn't have a govenor

Thanks, no need to be sarcastic. We're all friends who love linux here.
I didn't notice the part about kernel version.
It comes as a surprise because on the above mentioned kernel I get this
cat /sys/devices/system/cpu/cpu0/cpufreq/scaling_available_governors
ondemand performance

Initially I was going to upgrade to the newest kernel version possible, thinking I'd get the best possible performance that way. But the people on one of the #debian IRC channels discouraged me saying "newer isn't always better", "sometimes it's slower" etc.

I see there have been a lot of power features added to kernels newer than 3.2.
Which kernel version would you recommend?

It depends on what your interests are and your experience level with your operating system. If your new to Linux or your distro, I'd stay with the one that came in the package until I got comfortable troubleshooting issues on the system. You need to be able to diagnose source issues before you can get comfortable on the bleeding edge of technology. Most of the functionality you want in the later kernel is available to you in your current kernel if you learn enough about it. They (the Kernel team) use volunteers to test new functionality by including it as an optional flag in several prior kernel versions giving people like you a chance to test it out for bugs before deploying it as the default in the next kernel version.
If it's just a question of overall speed, there are a lot of strategies that don't involve kernel hacking to address that, starting with looking at how many processes your running as opposed to how many you use.