As long as my tables were less than 100, MySQL performed reasonably well but when they started to grow to more than a few hundreds, it (MYSQL) has become extremely slow. Now my tables are >1k and are very small and most contain less than 20-30 records.

Is there a specific MySQL setting which I should consider, in order for MySQL to perform better with large numbers of tables?

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What's slow? Are you doing mass inserts or complex joins and selects or simple queries? Database optimization is complex; the answer might be as simple as 'add an index' or as complex as tuning your caching or communication buffer sizes.

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Try also these scripts for MySQL optimization: http://blog.mysqltuner.com/ and http://www.day32.com/MySQL/

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Try table_cache = 1024. It will eat up some extra memory, but it should definitely improve performance.

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