I created a simple class that shows what I am trying to do without any noise. Feel free to bash away at my code. That's why I posted it here.

public class Throttled : IDisposable
{
    private readonly Action work;
    private readonly Func<bool> stop;
    private readonly ManualResetEvent continueProcessing;
    private readonly Timer throttleTimer;
    private readonly int throttlePeriod;
    private readonly int throttleLimit;
    private int totalProcessed;

    public Throttled(Action work, Func<bool> stop, int throttlePeriod, int throttleLimit)
    {
        this.work = work;
        this.stop = stop;
        this.throttlePeriod = throttlePeriod;
        this.throttleLimit = throttleLimit;
        continueProcessing = new ManualResetEvent(true);
        throttleTimer = new Timer(ThrottleUpdate, null, throttlePeriod, throttlePeriod);
    }

    public void Dispose()
    {
        throttleTimer.Dispose();
        ((IDisposable)continueProcessing).Dispose();
    }

    public void Execute()
    {
        while (!stop())
        {
            if (Interlocked.Increment(ref totalProcessed) > throttleLimit)
            {
                lock (continueProcessing)
                {
                    continueProcessing.Reset();
                }
                if (!continueProcessing.WaitOne(throttlePeriod))
                {
                    throw new TimeoutException();
                }
            }

            work();
        }
    }

    private void ThrottleUpdate(object state)
    {
        Interlocked.Exchange(ref totalProcessed, 0);
        lock (continueProcessing)
        {
            continueProcessing.Set();
        }
    }
}