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The memcached errors has very little if anything to do with litespeed. Really. Here is the way to make sure you have everything set up correctly.
1) Make sure memcached exists on a server that has the firewall disabled. Memcached is meant for a lan setup anyways.
2) Make sure you are using a current distro or with proper Linux tcp tunning, ie, short tcp_wait timeouts, etc. The latest versions of redhat/centos are pre-turned out of the box.
3) Make sure you are using the PECL memcache client. Using the latest stable one.
4) Make sure you are using persistent memcache connections. Using PECL memcache, it's persistent by default.
5) Use subversion to checkout memcached trunk from danga.com and compile memcached from there.
The version for public download is quite old. The trunk version has many optimizations.
There should be no reason memcached cannot handle more than 500+ concurrent connections.
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