One way to increase the performance of imagery in your map service is to cache it. Since it greatly reduces the amount of time required to render the imagery on your map, caching will allow you to show your imagery at a far greater extent than you could if it were being brought in dynamically. While imagery may lend itself to caching, I find on occasion it can be a bit troublesome to get the caching going. I had a bout of Error 999999 with my latest caching project - turns out 1400 sid images covering an entire county was a little more than ArcCatalog could chew. Fair enough, I had experienced similar issues before where I couldn't even get my ArcGIS Server map service to start because I was throwing too much imagery at it.
Enter the Raster Catalog. Using an unmanaged raster catalog as opposed to a managed raster catalog saved me a bundle of raster catalog loading time. While the managed raster catalog can take as long, or longer, than your cache creation time - so in my case, a day or two - the unmanaged raster catalog takes far less time to create and load - for me, under two hours.
And thanks (many, many thanks) to ESRI Support and the Color Balancing option in ArcMap, my previous misconception that raster catalog image quality had to be poor compared with the original imagery, is a thing of the past - and I have the completed cache to prove it.