lamp - mysql always using maximum connection

I have LAMP server having 4 core CPU and 32 GB RAM.We are running a large website on it. I have following issues now in my server.

1. When I use Mysqlreport tool to monitor the mysql server i am always seeing the connection usage as below. And the users reporting connection issues in the website.

_

Connections _________________________________________________________

Max used 251 of 250 %Max: 100.40 Total 748.71k
3.5/s

But when I use "show process list" command it will output nothing. We are using MyISAM engine for all our DBs.

My Mysql Config File is pasted below:

######################

[mysqld]

max_connections = 250

set-variable=local-infile=0

datadir=/var/lib/mysql

socket=/var/lib/mysql/mysql.sock

user=mysql

skip-name-resolve

skip-bdb

wait_timeout = 60

thread_cache_size = 100

table_cache = 1024

key_buffer = 384M

log_slow_queries=/mysql-log/mysql-slow.log

query-cache-size=512M

query-cache-type=1

query_cache_limit=20M

[mysqld_safe]

log-error=/var/log/mysqld.log

pid-file=/var/run/mysqld/mysqld.pid

#

Who is using my Mysql connection pool? How can I find it?

And i have another issue.

2. Sometimes the Load average goes beyond 4-8 range. See below:

13:40:02 up 2 days, 10:39, 0 users, load average: 5.03, 1.68, 0.93

At that time i can see mysql is the top consumer of the CPU. Is there any optimization needed in mysql Server?