So when would I use a Raster Catalog or Raster Dataset?
I can't think of scenario where you will want to use a Raster Catalog over a Mosaic Dataset. Mosaic Datasets perform much faster. As for a raster dataset, a good scenario to use these would be for outputs from geoprocessing tools. For example, if you ran the IDW tool, the output would be a raster dataset. Or, you could use a raster dataset when you need to work with a small individual raster.
If you plan to mosaic 40 TIFFs together and use them in ArcGIS, you would want to use a mosaic dataset.
Are you ultimately using the mosaic in ArcGIS, or do you need to use it in other software? If you need to use it in other software, what output can the raster be (or need to be), i.e. TIFF, JP2, JPEG, etc?