Description
The Upload data to server parameter should only be checked when the ArcGIS Server account cannot be granted access to the directories of the Source Cache Dataset and Source Tile Package parameter values. When Upload data to server parameter is checked, 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. Unchecking the Upload data to server 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 directories of Source Cache Dataset and Source Tile Package parameter values.
Solution
Grant read permissions for the ArcGIS Server account to the directories of the Source Cache Dataset and Source Tile Package parameter values to gain better performance. Uncheck the Upload data to server parameter.