SharePoint 2007 log files only contain “Tracing Service lost trace events.”

Question

We have a problem with logging in our SharePoint 2007 environment. No matter what we try, the log files only contain a wsstracing "lost trace events" message over and over again.

wsstracing.exe (0x95BC)                     0x43A8  ULS Logging                     Unified Logging Service         uls1    Monitorable Tracing Service lost trace events.  Current value 13.   

I will list below the steps we have taken to try and fix:

1. Changed event throttling for all trace events (tried all options)
2. Changed log file location and double checked that the service account could write to the log file. (This was verified by using PCMON to see successful log writes)
3. Verified there is sufficient hard drive space available
4. Simply restarting the tracing service (all MOSS services for that matter) does not help. We have a nightly backup/restart script running as well that doesn't seem to help.
5. Have patched to SP2 and most recent CU

Any help or insight into this matter would be greatly appreciated. Thank you.