The option for upload_data_to_server should be checked only when the ArcGIS Server account cannot be granted access to the source_cache_dataset and source_tile_package directories. When this option is used, cache tiles are first extracted in the user temp directory, uploaded to the ArcGIS output directory, and imported to the service cache directory on the server. Using DO_NOT_UPLOAD will move cache tiles from the source cache directory to the service cache directory, which will be faster but requires that the ArcGIS Server account has read permissions to the source_cache_dataset and source_tile_package directories.
Grant read permissions to ArcGIS Server account at the source_cache_dataset/source_tile_package directories to gain better performance. Uncheck the option to upload_data_to_server in the tool. In Python, set the value of upload_data_to_server to DO_NOT_UPLOAD.