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PHP can scale, however i think what we've seen historically is that the programmers who have written most of the PHP apps out there don't know how to write a scalable app.

Facebook began using HipHop (their PHP compiler) at a time when they already had 200 million users and a website that by definition is very hard to cache. So in other words, PHP without Facebook's custom compiler was able to handle a site having 200 million frequently returning users. I'd say that's pretty good.

Sources: http://www.h-online.com/open/news/item/HipHop-Facebook-s-PHP... and http://en.wikipedia.org/wiki/Facebook

But it wasn't all running on a single VPS.

If OP had thrown more hardware (and hardware costs) at the equation his problems would have reduced.

This is not a very useful response. If you enjoy the advantages of interpreted languages, accept the consequences. If you don't, well, good luck with websites implemented in compiled languages.