Here's advice from a guy who has been making love karezza-style for years:
I think you will find that the discomfort will pass as your body reorients itself to this new way of engaging sexually. You mentioned you have tried cold water and breathing the energy up with some success, here are a couple of other tips:
One, if you find yourself getting close to the edge while practicing karezza, cool it down a bit. Enough to keep your erection but not so much that you get heated up. Stay in the middle zone.
Second, penetrate your girlfriend from your "root," in a relaxed way. Let me explain. There is a tendency, especially in the beginning of non-orgasmic lovemaking, to clench the muscle between your anus and penis when practicing karezza since you don't want to go over the edge into an orgasm. If you tend to squeeze a lot this can cause the blue balls effect. This is when I have experienced it. If you keep the pelvic floor muscles relaxed most of the time, the energy doesn't seem to build up, at least thats what I experience. Staying in deep and not getting too heated is what I do to keep the pelvic floor muscles relaxed. The longer we go in a single session the easier it gets to stay fully relaxed.
I thought more about your blue balls dilemma the other day so I carefully paid attention to what I do when engaging with my wife. What struck me was how the penis is a sending instrument designed to obviously send semen into the woman. Even if you don't orgasm and send the physical substance, a penis is still built to be a sending tool so you need to send something when engaging sexually. What I observe I do is send energy.
This may sound a little airy fairy but I think if you pay attention the feeling of sending will come to you. What I do is send this energy at the bottom of every stroke. It goes like this; when I move outward I squeeze that PC muscle I talked about, a little bit, and often not at all. The farther out I withdraw, which is rarely all that much, the more I tend to gently squeeze, never hard though, always pretty lightly. If you're really squeezing then you're to close to the edge and need to slow it down.
On the way back in I relax at some point before I'm in all the way. When I'm at maximum penetration I totally relax, send the energy, and pause there. Sometimes only for a few seconds, sometimes for minutes. I think if you pay attention you will notice this natural "sending" energy when you are fully penetrated, relaxed, and at rest, even if the rest is only momentary.
If you "send" at the bottom of every stroke you'll siphon off the energy that can build up and lead to blue balls. Think about it, in regular sex you build it up and up until the energy has to go somewhere and you send all that built up energy out in the form of semen. Where's it going to go if you don't ejaculate it out? If you send it into your woman energetically at every stroke you shouldn't get the blue balls build up.
If the two of you are tuned into each other she should like the receiving sensation of the 'sending energy' you give her. This sending and receiving flow between lovers is what karezza is all about—very, very sweet. Also, you said you were going for an hour or two, that's a lot of energy that has to go somewhere.
With karezza you are taking a process that is normally physical and transmuting it into something energetic, energy based. It takes a while for the body to get the hang of it, especially with the length of time you two go at it. If blue balls continue you may want to go for shorter lengths of time and build up slowly. Don't get me wrong, I think its great to go for a long time; we do this ourselves. You just may want to start with less as your body learns.
I usually don't have the urge to "send" the energy right away, it takes a bit before I start to have the "sending" feeling. The longer we go the more I get into a 'sending' flow. Once we're really in the feeling and flow, there's almost never any squeezing at all, my genitals and pelvic floor are completely relaxed. One of the interesting things I've noticed is that my penis stays much more erect when I'm completely relaxed then when I'm clenching or squeezing. It's like my penis has a direction of its own when I let go, I just sit back and enjoy the ride.
One other thing, about the cold water technique, I'd do it as soon as you get out of bed. Really rinse down your entire crotch area, not just your testicles. A shower head that is removable is really good for this.
Wish you the best. You will get the hang of it. Practicing karezza with a partner is one of the most deeply satisfying experiences I have in life. Its well worth the learning curve.