MongoDB refusing connections on high volume ( 10000 ) inserts / writes

We are inserting data through a Node.js application and connecting to mongodb using the node-mongodb-native library. Mongo DB is sharded with a total of 5 shards. The node and mongos instance is contained on a quad core AWS instance with 14980MB of RAM. Two shards and the config server are contained in a single core instance and the remaining three shards are on a different instance with a single core processor.

We can effectively insert 1000 records concurrently in 9 seconds using a Node.js test script.

For 10000 concurrent inserts, about 2000 of them fail and return the following error message:

    [Error: failed to connect to [ip address of mongos]]

During this 10000 insert process, the first 5000 or 6000 inserts are successful with no error. During this time, the CPU usage remains relatively low (13% usage). Then the CPU on one core jumps to about 75% and MongoDB throws the error message refusing connections. After some failures to insert, some writes are intermittently succesful.

We've set ulimit -n to 20000 on linux. We have passed the poolSize=5 parameter within the insert function in our Node.js api.

var responseHandlers = require('./responseHandlers')
    ,schemaValidation = require('./schemaValidation')
    ,mongoDb = require('mongodb')
    ,md5 = require('MD5')
    ,ObjectID = require('mongodb').ObjectID;

function insert(data, timestamp, response) {
  // validating the data to be inserted
  schemaValidation.validate(data, function(err) {
    if(err) {
      console.log(err);
      responseHandlers.invalidRequest(response, 2); 
    } else {
      //console.log("opening db..");
      server = new mongoDb.Server(mongoConfig.host,mongoConfig.port,{'auto_reconnect': true, 'poolSize': 5});
      db = new mongoDb.Db(mongoConfig.database, server, {w: 1});
      db.open(function(err, db) {
        if(err) { 
          console.log(err);
          responseHandlers.invalidRequest(response, 2); 
        } else {
          db.collection(mongoConfig.collection, function(err, collection) {
            if(err) {
              console.log(err);
              responseHandlers.invalidRequest(response, 2); 
            } else {
              //going to instantiate document fields
              var time = new Date().getTime(),
              oid = new ObjectID(),
              hash = md5(oid.toHexString()),
                            obj = {'data_utc' : timestamp, 'server_utc' : time, '_id' : oid,    'hash' : hash}; 
                            obj.data = data;
              //inserting..
              collection.insert(obj, {w:1}, function(err, result) {
                if(err) {
                  console.log(err);
                  responseHandlers.invalidRequest(response, 2); 
                } else {
                  console.log('Insert successful');
                  responseHandlers.validRequest(response, false, result);
                }   
              db.close();
              }); 
            }   
          }); 
        }   
      });   
    }   
  }); 
}   
exports.insert = insert;

Can anyone help with why it would be refusing connections, failing to insert? Why does it work for a portion of the inserts then fail about halfway through?