Hi Andrew,
That is great to know that model iterators will work in a service.
The model that I posted is only a portion of the total process. I learned through testing that submodels would not work properly in a service, so I have split the whole process into three GP services that will be called by Flex to run consecutively. The final output is tabular statistics.
Adding the zip option to the end of each model, then unzipping for the next model, would add run time. Is there no other way to have multiple feature set/feature class output?