Ok I found a decent solution.
I was using an older build of ArcGIS Mobile and Project Center, Buil2475.
I simply installed Build 2500 over the previous build as instructed and things are much smoother.
1) Adding TileCache to Project Center does not crash MPC, which is good.
2) When zooming in ArcGIS Mobile I don't see such a huge performance hit with a TileCache layer enabled.
3) When zooming I can for the most part zoom to full extent and then zoom back to the small Raster layer. Once again, no performance hits when zoom around at full extent. Once the Raster layer is suppose to be drawn there is a small delay.
4) [Problem] When at full extent, and I try to zoom to where the raster TileCache layer is located, ArcGIS Mobile can hang and crash, giving no error. I also checked the Logs and no error was logged.
Overall the Build 2500 did work, but it is still not perfect. ArcGIS Mobile can still crash when I manually attempt to zoom to the TileCache.
5) In addition, the TileCache layer that is added in ArcGIS Mobile WPF Out-of-the-Box solution does not show the name of the layer when using code to add the TileCache from a local directory.
Can anyone kindly provide an solution to get a name to appear for the Layer?
Thanks