Shards per node, Heap, 100% CPU....help please

Yes. Having lots of very small shards is very inefficient and can cause performance as well as severe stability problems.

Yes, that will reduce the rate at which the shard count increases. You do however also need to dramatically reduce the shard cound and as you are on such an old version your options are as far as I can remember limited ton deleting indices or reindexing them into fewer larger ones.