This article specifies three known limitations of Group Layers in ArcMap Server:
1: Group Layer Members are unable to inherit scale dependancy settings from the Group Layer properties. Scale dependencies must be set for each individual layer. This issue has been resolved in version 9.2.
2: ArcMap Services treat Group Layers and Group Layer Members as separate layers, but there is no ability within the layer list or legend to distinguish Group Layers, Group Layer Members, and individual layers.
In ArcIMS 9.2 GET_FEATURES requests made to Arcmap services with outputmode="newxml" will return field aliases set in the ArcMap document as part of query response. However you will not be able to query using a field alias name.
3: ArcMap documents containing empty group layers can be served. However, you will not be able to view any of the map's features. You will need to:
a. Delete the empty group layer from the ArcMap Document;
b. Refresh the ArcMap Service.
There are no workarounds for limitations 1 and 2.