Why overheating even though laptop power setting is set to sleep?

Is your workstation a Z400 with a Xeon W3550?
The Xeon W3550 doesn't seem to have temperature sensors in it.

As it is an old workstation, is the CPU heat sink dust free?

Oh... I updated my profile. In actual fact it's a 1 year old Dell Inspiron laptop.

Fortitude said:

I'm running Windows 10 Pro v.2004 OS Build 19041.264 on a laptop. The power settings are for the screen to turn off after 10 minutes and the laptop to go to sleep after three hours. The laptop is always plugged in... Is there background activity even when the laptop is set to sleep...?

I'm guessing you've run into Microsoft's apparent decision, with the Win 10 v2004 update, to implement "Modern Standby" (also known as "Connected Standby", previously "InstantGo"). In systems that support this "feature", some hardware remains powered up even when you put your PC into what you assume is a sleep-type mode (where, formerly, only RAM was kept powered). Here's MS's technical explanation.

It started happening on my system as soon as I installed the v2004 update (which can be delayed, but is eventually mandatory). My USB cooling pad, keyboard and mouse started staying on even when I closed my laptop's lid. In some systems, network connections stay on, too.

These all used to be options, in Settings > "USB Power" and "Power and Sleep". They've been removed. You may also notice that "Sleep" is gone from your Start Menu's Shut Down menu (even though it may still be selected in Power Options > "Choose what the power buttons do"). Corresponding registry "hacks" no longer work either (even though their keys are still present; I guess MS couldn't be bothered to remove them).

MS claims they've done this to:

(a.) Keep USB ports always available for charging other devices.

(b.) Make systems spring instantly back to life when resuming.

(c.) Wake your computer with voice commands (ooh, neat-o!).

In other words, they want our computers to behave like smartphones, which also stay connected when their displays are off.

I suspect it's also so MS can push updates (and what else?) at any time, without users's direct involvement or knowledge. MS itself states that when devices are on Modern Standby, they can "download updates and email" even when they're not being used.

Naturally, this has reduced Standby battery time. (I've noticed quite a difference, even when I manually disconnect the network and unplug all USB devices before closing my lid.)

So, in other words, this is MS's latest decision about how we should use our own computers—and because it's been implemented at the kernel level, there may be no way to change it.

I can only suggest you blow out your laptop with compressed air (which you should do periodically anyway) so it'll run as cooly as possible. And welcome to the 21st century in proprietary OSs. :?O

Ander gave us a good explanation on what may be happening.

I see from the Inspiron 5482 specs that it can have a i3, i5 or i7.
What CPU you have?

The CPU is i7 8565U