Hi Andrew,
You can check the LB_FAILED wiki page for details:
http://devcentral.f5.com/wiki/default.aspx/iRules/lb_failed
LB_FAILED is triggered when LTM is ready to send the request to a pool member and one hasn’t been chosen (the system failed to select a pool or a pool member), is unreachable (when no route to the target exists), or is non-responsive (fails to respond to a connection request).
How often do you see LB_FAILED triggered? If it's fairly consistent you could try running a tcpdump to capture the communication. I'd try capturing the client and serverside connection info in the trace so you can see exactly what's happening.
Aaron