Matthew are the "mystery" disk io load you mention in #7 the same as you
describe in #6?  In #6 what else are you running on the machine?  Do you
have additional instances running.  Another possibility is what
filesystems are you using on the host and instance.

In my initial round of testing this was looking more like a load average
calculation bug where load from the host system was showing up reported
in the guest.

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High load averages on Lucid EC2 while idling
https://bugs.launchpad.net/bugs/574910
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