Use an alarm signal to handle instance creation timeout.

The EC2 API can respond with 'InvalidInstanceID.NotFound' for extended periods of time after requesting a server.  (This behavior was experienced on 2 Jan 2014).

This unexpected API behavior meant that a 'while True:' loop in the ec2 module that was meant to handle very brief delays before instance availability became permanent blockers, and ansible waited far longer than the wait_timeout before failing.

I'm not sure what you're preferred solution to this issue might be, but I decided I'd start the conversation by proposing a simple alarm based solution.