You can also use gates on the pipes which will output redstone if the chest is full which can be used to turn off your quarry.
I think that would be the best.
I also suspect the overflow would have contributed, and one issue was that time seemed to stand still on the server and thus I think the 5 minute timeout for blocks on the ground was also slowed down.
I'm voiding all my cobble at this point, I have way to much of it and I'm not planning on building with it.
However once we get our Matter Fabricator I think we can recycle it all instead.