I just noticed that your layer doesn't have a valid spatial reference. This is a requirement to blend with other layers.
Also just because it works in ArcMap doesn't mean it works the same way in the Client APIs. As I mentioned these are two very different beasts, and they talk to the server in different ways. ArcMap uses either local DCOM or SOAP to talk to the server, whereas the client API's uses a much simpler REST interface, the latter which ignores any rotation you have in the service (thus you wont see any rotation in the client api's when you set it in the map document). As mentioned, using the rotation property of the map control in the client api allows you to rotate the map on the fly.