Even with Kp, I am experiencing this problem. I do not think it has something to do with my PID parameters. I personally think it has something to do with the scaling between master and slave. The gearhead on the motor has a reduction radio of 377:1 while my master is 1:1. This difference in scales (I believe) should cause some issue.
But, I also feel it could be ISR and floating point math - because even with a scaling ratio the PWM shouldn't go on to infinite.
In regards to your question, "How many pulses per second are you expecting?" I believe that is coming from the large amount of pulses from the slave end with the gearbox. Because of the gearbox, there are tons of pulses coming in - especially when the motor exceeds maximum speed.
This is unnecessary frustration 
Daniel
EDIT: johnwasser, maximum PWM signal is given (100%) - as this happens when the err goes through the roof. I get pulses coming back at ~43Khz. The Arduino should be able to process the ISR at this frequency, can it not? Perhaps givening maximum PWM signal produces too quick of a interupt frequency in which the processor cannot keep up?