I have splited the db into 4096 databases and now the performance of the individual blogs have improved by heaps and bounds. But this has caused a side-effect for me. Now my WordPress admin interface is too slow and most of the PHP timesout. I have increased the timeout period to 60 seconds but even then it is too slow.
It will be really helpful for me to know whether anyone else have faced this problem before and if yes then how did you solved it. Thanks!