Mosaic datasets can be consumed in any license level of ArcGIS for Desktop. However, if you attempt to publish a map service that uses a mosaic dataset, you'll find that the image extension is required. I can see why it would be required for standalone image services (publishing the mosaic dataset directly), but it seems like publishing map services should not require the extension.
Are your use-cases/workflows same as @RyanKelso's ? or something different?
Thanks @RyanKelso for providing us your workflow.
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