I have similar problems. I'm not sure when these problems started (been running LFS hosts since 2002), I got used to "guest timed out" messages and hoped that someday patches would fix this problem.
Now I use v0.5T5 dedicated, still getting too much "new guest timed out" messages. As I mentioned, I'm not sure when time out messages started to appear more often, must have been after S1 release. I have opened required TCP/UDP ports starting from 63390 (running several hosts on one machine). 29339/TCP is now also open.
It should work fine as long as every instance uses different TCP/UDP ports. I have several LFS directories, one per LFS instance and all use their own port. Works fine. The message "Warning : another instance of LFS is running" is normal and should be ignored unless there is crashed LFS host running in the background.