Thanks a lot. Yes, I remember that.
We just figured out that Lite Speed doesn't take into account maxEntryProcs that LVE has.
So, if you site runs more PHP scripts then there is maxEntryProcs -- all extra scripts will run outside LVE -- dragging down the server.
You can control number of concurrent PHP scripts via LiteSpeed, on per user bases by setting PHP suEXEC Max Conns option.
Make sure this value is lower then maxEntryProcs.
In the future versions LiteSpeed will correctly reject (or queue requests) to server dynamic content once the site is over maxEntryProcs.