I have a dataset in "USA Contiguous Albers Equal Area Conic" that I'm serving out thru a map service to be displayed in web maps in "Web Mercator". I can NOT project the dataset before publishing. It has to be live to the database as is.
I tend to think it's better to let the consumers of the service know the datasets will be projected on the fly so they keep performance in mind. But in reading thru some documentation and threads it seems like the ArcSOC process might have caching or initialization savings if the MXD is set to Web Mercator initially rather than on each request. But I can't find anything explicit about this so I might just be reading more into those comments.