Puzzling QoS Issue

I have a 3945 ISR router connected via a GigabitEthernet link to a service
provider that is providing 10Mbps WAN access. I wish to use CBWFQ and the
service provider requires dot1q tagging. As such, I must shape my
sub-interface and use a hierarchical type QoS policy...no big deal

policy-map WAN-EDGE
 class VOICE
  priority percent 20
!
 class VIDEO
  bandwidth remaining percent 60
  queue-limit 128 packets
!
 class APPS_SIGNALING
  set dscp af21
  bandwidth remaining percent 30
!
  class class-default
  bandwidth remaining percent 10
!
!
policy-map SHAPE-OUT
 class class-default
  shape average 10000000
   service-policy WAN-EDGE
!
!
int gi0/1.2
 encapsulation dot1q 2
 ip address ...
 service-policy output SHAPE-OUT

Here is the very strange thing. Even when the TX of this WAN interface is
barely being used, when and only when the service-policy is applied, the
response in pings to anything behind this router increase immediately by
200-400ms. Immediately after removing the service-policy things return to
normal.

Investigating the output of "show policy-map interface" reveals a large
number of output drops in the shaper class-default. So far I have tried

- increasing the queue-limit to many different combinations
- increasing the burst size

I also have the exact same configuration on another remote site router
running the same version of IOS with the same setup (10Mbps Ethernet WAN
link) on the same platform.

I'm really baffled as to what would cause this. Any insight appreciated.

-- 
Regards,
Joe Astorino
CCIE #24347
http://astorinonetworks.com
"He not busy being born is busy dying" - Dylan
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