For those interested in coming up with a solution , here is what worked.
To get an image to be displayed in Infopath I made a key value called my:value under the myFields subfolder in Data Sources.
My web service was returning a path which I was assigning to this key value.
A picture control was linked to the my:value's XPath and "Allow users to upload an image" was disabled.
To get this to work, I had to modify the code behind a button I was calling Generate Graph, and pulled up its C# code.
Here, under the Clicked Event for the button control, I added the following:
public void CTRL2_6_Clicked(object sender, ClickedEventArgs e)
{
GenerateGraph();
}
private void GenerateGraph()
{
string path = auto.Graph();
XPathNavigator xnDoc = this.MainDataSource.CreateNavigator();
XPathNavigator xnPath = xnDoc.SelectSingleNode("/dfs:myFields/my:value", this.NamespaceManager);
xnPath.SetValue(path);
}
Note: auto is my webservice which I've instantiated in the InternalStartup() method which is provided by default.