I had the same problem with dropbox a couple years ago. Generally it's a good idea to leave a bit of upload bandwidth free if you have the option otherwise it can degrade certain services (possibly related to the server perceiving it as having excess timeouts/lost packetsmy guess).
that's pretty much exactly what happens some amount of bandwidth is needed for each "flow" to manage its connection - when packet acknowledgements are lost due to congestion everything can really go to hell. TCP is supposed to handle this (and in general it does) but sometimes when your uplink is 'full' things go bad quickly.
it's the reason why download speeds on bit torrent can suck if you've maxed out your uplink. the acknowledgments your end is sending for the downloaded packets are lost and the other end thinks the packets it sent were lost, and so need to be retransmitted.