I left it alone for a week, came back and figured it out easily.. sometimes you just need go for a walk, and not over-think these things.
The issue was caching. I changed the image handler url by adding a nocache param in the OnDataBinding:
OLD:
ImageEdit.ImageUrl = "http://localhost/WebServices.CAD/ImageHandler.ashx?uri=" + row.uri;
NEW:
ImageEdit.ImageUrl = "http://localhost/WebServices.CAD/ImageHandler.ashx?nocache=" + System.DateTime.Now.Ticks.ToString() + "&uri=" + row.uri;
Works as designed.