At v9.2, ArcMap does not allow Image Server images to be clipped to a custom extent and exported locally.

But, using the Image Server Viewer that installs with the Image Server client, you can zoom to your area of interest and export the image to a local file using almost any file type, geographic extent, and pixel size you desire.

Here's how:

0. You must have already installed the free Image Server client for ArcGIS.

1. From Start --> Programs, browse to the list of ArcGIS applications and open the ImageServer Viewer 

2. Zoom to your area of interest and select Export Image from the File menu.

3. Set parameters and click OK.