Nginx – Setting up nginx and php-fpm on CentOS 7 – which config file do I alter? I’m so lost

So what you have there is a symbolic link that links back to itself. I don't see how that's possible with the command you listed at the top of your question, so I suspect this particular symbolic link was created differently.

I can replicate your scenario like this:

sazerac:~ insyte$ cd testlinks/
sazerac:~/testlinks insyte$ ls
sazerac:~/testlinks insyte$ ln -s www www
sazerac:~/testlinks insyte$ ls -l
total 8
lrwxr-xr-x  1 insyte  staff  3 Mar  5 10:33 www -> www

Let's try an experiment. Execute the following commands exactly as listed:

echo "hello insyte" > /etc/nginx/sites-available/insyte
ln -s /etc/nginx/sites-available/insyte /etc/nginx/sites-enabled
ls -l /etc/nginx/sites-enabled|grep insyte
cat /etc/nginx/sites-enabled/insyte

Well, kinda well. Lots of CPU used but theres only a few of them, so its kinda ok

The amount of work a process does is given by the amount of CPU it uses - hence it's the % usage x the time it's being used for. So if your PHP processes are using up lots of CPU then that's usually a good thing - it means it's not waiting for other stuff to happen. From a systems admin point of view you can make more CPU available for other tasks - but you'll increase the amount of time taken for a PHP process to handle a request.

And of course if requests are coming in at steady rate, taking longer to process them means that there will be more process working (or waiting to be scheduled) at any one time, and the larger memory footprint means less memory available for VFS caching. There's also the risk that the scheduler will start pre-empting tasks rather than letting them yeild which decreases overall throughput.

Hence you should be aiming for high CPU usage! (but low load).

Memory limit in php.ini is 128mb

This is rather high, but since the CPU usage is high that indicates it's not too much of a problem UNLESS each request is taking a long time to complete and doing a lot of garbage collection - in this scenario, forcing more frequent garbage collection by reducing the memory limit can actually improve performance.

I've had so much downtime lately

For what it's worth I've found APC to be a lot more reliable than Xcache - and that seems to be the trend in what I've read elsewhere. Don't have any experience / data on the Zend Optimizer+ which is due to be bundled with future versions of PHP.

I'm verging on setting up Apache again and I'd love to stick with this

Pre-fork apache + mod_php is significantly faster than nginx + php-fpm at lower traffic volumes - but nginx seems to have a massive advantage when the load / request rate is medium - high relative to the hardware capacity (which is where you seem to be).

If it were me I'd be looking hard at the logs to see if the spikes are due to an increase in the traffic volume / a change in the traffic profile / a change in the response time. Also looking hard at caching and code. You might consider temporarily running a profiler against the live site (use xhprof - not xdebug for a production system).