** This issue has been resolved in ArcGIS 9.0. **
An ArcMap Service contains a layer or layers that reference raster images using a raster catalog. When viewed in an ArcMap Server client, the images do not display.
ArcMap Server will not be able to display images of a raster catalog if the catalog is stored in ArcSDE and the catalog references image files stored on disk.
To serve raster catalogs stored on ArcSDE successfully using ArcMap Server, select one of the following options:
- Embed the images within the catalog itself.
- Copy all referenced images into ArcSDE and make sure that the catalog refers to the images stored in ArcSDE and not to those stored on disk.