first, you're looking at the root effect and not causes. if it was the size of your installation, then turning off IIS Requests during the recycle phase wouldn't help either, your site would simply not restart.  So that in itself cannot be a root cause.

The fact that you say that cpu never really reaches any peak (and I'm assuming any one processor is not reaching peak there) also dictates that the system is not busy processing during this phase.

Thus, it's deadlocking - somewhere.  otherwise, it would start up.  When you get right down to it, if the CPU isn't slammed, it's in a wait queue.  There's no magic there.  What's it waiting for is the real question - threads? deadlocking somewhere inside of appstart? locked on a file system file?  etc,etc - but there's very few things that stop execution of code.

Do some engineering analysis.  force recycles by touching your web.config and monitor what happens, that should give you a better clue.  an example:  two windows, one sit on the sql trace start button, the other, readying to save the web.config.  hit them both at the same time.  what happens in sql trace?  what's the last thing that gets executed before it sits - or is it continually retrying a procedure?  again, that should leave you to a second part which should help you narrow down the focus of your investigation.

Or it simply could be that .NET / DNN can't handle that many incoming requests during a restart - in which case, split up your installation - however, I doubt very much that is the cause, but more likely something happening during app start in dnn, that just doesn't predict that so many incoming requests will occur at the same time as the app start sections are being handled.  Which is why I suggested try removing sections from the httpmodules section and see the affect, but you're going to have to do something - no one's going to give you an answer to this without you narrowing down the scope.  That being said, if you don't want to do it - then simply turn off IIS during the restarts and get around it that way.  Choice is yours.