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Traffic on an EC2 micro instance for a website I run: http://i.imgur.com/bR6I8.png

That is a higher traffic site than I expected a Micro to be able to handle.

Are you hosting dynamic content (PHP, Java, etc.) or is everything really heavily cached in static files/varnish and hosted out by nginx quickly so as to avoid saturating CPU or I/O?

Static. On this site I host mostly huge-ass html files (about 1 MB per request) with apache 2 and mod_deflate :-)

There is also a wordpress site and another database-request-heavy site with 500 requests a day.

The problems I had was that the access.log and error.log quickly ate up the 5GB space of the micro instance :-) Causing mysql to stop operating and me to scratch my head for a few minutes.

5GB is not a lot .. you want ruby1.9 with the default setup? That will be 180MB, and so on :-)

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