Dry ice and Kerosene is actually the safest of the bunch-acetone is dangerous, due to the low flash point. I used the kerosene/dry ice combo before I bought my Liquid Nitrogen set up. Dry ice isn't cheap, and the kerosene was messy/smelly and hard to dispose of afterwards. I believe you can get down to -100-120 this way. And you are right, the liquid is there so that the whold tool is cooled evenly.
LN2 gets you down to -320 or so, which is just that much better. It is also a lot cleaner to use, as it turns into Nitrogen gas and just goes away.
What you are doing here is taking the steel down to below, or very near the finish temperature for the Martensite transformation, which is often well below room temp-it gets lower as the alloy content of the steel increases.
There are additional, documented benefits of reduced grain size, carbide size and distribution, all of which make the steel very happy and a better cutting tool.
Many heat treaters still do this cryo treatment right after the quench, believing that, if the transformation is allowed to stop for any length of time, the retained Austenite will stabilize, and not convert to Martensite during the subsequent cryo treatment. This is what I was taught in college.
Recently, it has been documented that this is not correct, and that it is preferable to temper once before cryo treatment, with the result being smaller grain size and thus more toughness. You should always temper again after cryo treatment, so that the new Martensite gets tempered.
Either way, cryo treatment will improve the quality of the steel's structure. It may or may not increase the hardness-the better the primary heat treatment is, the less hardness increase you get with cryo.
If the initial treatment was off- oversoaked, for example, then the cryo will make the hardness increase, because of the large amounts of retained austenite left in the steel from the poor heat treatment.
Hope this hasn't been just long and boring. Honestly, the coolest thing is looking into my Dewar's flask at the clear liquid in there, and realizing it is so frieking cold-it blows the mind!! minus 320!! WOW
If you are interested in having this done, check out the post by Advisor in Metals, here on Bladeforums. He taught me all this cool stuff as it applies to knife blades.
RJ Martin