USB-232 converters - rts/cts latency problem
In my experience, RTS/CTS signals on the modern serial converter chips are horribly underspecified. There is no specifications on them in the standard (in fact, the standard describes RTS/CTS as uni-directional flow control to modem only -- the method no one implements today). Thus, manufactures just make sure the flow control works with regular PCs, which all use 16550A-compatible serial ports with 16 byte FIFOs.

You may try different USB&lt;->Serial chips  (like PL2103 or CP2103), but success is not guaranteed. So:


Use DMA if your chip supports it.
Lower transmission speed
Try old-scool 16550A UART or use a newer I2C UARTs like MAX3107
Use a different FTDI chip -- for example, FT245 has parallel interface; it will only give you the next byte when you toggle RD# pin