A method to reduce packet drops for network traffic monitoring, comprising: communicating network traffic with a network application operating within a first virtual processing environment within a first host server; at a tap agent also operating within the first virtual processing environment: monitoring and capturing packets from the network traffic; encapsulating at least a portion of the captured packets with headers including sequence numbers to generate tap packets; and forwarding at least a portion of the tap packets to a tool agent operating within a second virtual processing environment within a second host server; at the tool agent operating within the second virtual processing environment: detecting dropped packets within the tap packets based upon the sequence numbers; and outputting a drop detection message based upon the detected dropped packets; and at the tap agent: adjusting operation based upon the drop detection message to reduce packet drops within subsequent tap packets forwarded to the tool agent; and repeating the monitoring and capturing, encapsulating, and forwarding; wherein the adjusting comprises at least one of decreasing sampling rates, truncating payloads for subsequent captured packets, or generating metadata for subsequent captured packets and forwarding the metadata rather than payload data to the tool agent. communicating network traffic with a network application operating within a first virtual processing environment within a first host server; at a tap agent also operating within the first virtual processing environment: monitoring and capturing packets from the network traffic; encapsulating at least a portion of the captured packets with headers including sequence numbers to generate tap packets; and forwarding at least a portion of the tap packets to a tool agent operating within a second virtual processing environment within a second host server; monitoring and capturing packets from the network traffic; encapsulating at least a portion of the captured packets with headers including sequence numbers to generate tap packets; and forwarding at least a portion of the tap packets to a tool agent operating within a second virtual processing environment within a second host server; at the tool agent operating within the second virtual processing environment: detecting dropped packets within the tap packets based upon the sequence numbers; and outputting a drop detection message based upon the detected dropped packets; and detecting dropped packets within the tap packets based upon the sequence numbers; and outputting a drop detection message based upon the detected dropped packets; and at the tap agent: adjusting operation based upon the drop detection message to reduce packet drops within subsequent tap packets forwarded to the tool agent; and repeating the monitoring and capturing, encapsulating, and forwarding; wherein the adjusting comprises at least one of decreasing sampling rates, truncating payloads for subsequent captured packets, or generating metadata for subsequent captured packets and forwarding the metadata rather than payload data to the tool agent. adjusting operation based upon the drop detection message to reduce packet drops within subsequent tap packets forwarded to the tool agent; and repeating the monitoring and capturing, encapsulating, and forwarding; wherein the adjusting comprises at least one of decreasing sampling rates, truncating payloads for subsequent captured packets, or generating metadata for subsequent captured packets and forwarding the metadata rather than payload data to the tool agent. <EOS>