EC2 cloud beginning to burst?

There is talk of EC2 starting to hit some real world limits:

Amazon in the early days was fantastic. Instances started up within a couple of minutes, they rarely had any problems and even their SMALL INSTANCE was strong enough to power even the moderately used MySQL database. For a good 20 months, all was well in the Amazon world, with really no need for concern or complaint.

...

As time went on, and our load increased, the real usefulness of the SMALL instances, soon disappeared with us pretty much writing off any real production use of them. This is a shame, as many of our web servers are not CPU intensive, just I/O instensive. Moving up to the "High-CPU Medium Instance" as our base image has given us some of that early-pioneer feeling that we are indeed getting the intended throughput that we expect from an instance. Feel somewhat cheated here, as Amazon is forcing us to go to a higher priced instance just because they can't seem to cope with the volume of Small instances.

The post goes on to show evidence for the slowdown. In addition, cloudkick posted its own evidence:

Amazon's response, or lack thereof, will be telling. Competition with Rackspace is heating up, and this could develop into a major problem for AWS if not handled well.

Update: Some reaction from the community, re-affirming the importance of communication and transparency:

"It really bugs me that Amazon rarely admits the many faults that go on within their cloud. The status page just shows all green with no notes, even when you see multiple major sites drop off the web, report problems on Twitter, etc.

Numerous times I've had EC2 and EBS go out of contact (or simply have huge network latency, essentially the same). Since my instances run off RAID arrays of EBS volumes, essentially everything dies until EBS reappears." -- dangrossman (HN)

"You leave out one of the biggest problems with AWS, the super lack of documentation and well maintained community sites. This is really where much of the problem lies. If people could more effectively communicate, it would make everybody's life easier on there." -- Adam Nelson (Comments)