Just my 2c - I think you probably want to limit yourself to smaller areas as others have said. I'd not want to go over a gigapixel - maybe 30,000 by 30,000 pixels.
Since you're using data from CFHT and will therefore have fully populated astrometry headers, and since you mention background modelling and wanting to build mosaics, I would strongly recommend Caltech's Montage software -
http://montage.ipac.caltech.edu . It'll take care of a number of these steps for you with command line utilities, a number of which are coded in MPI so they can be run on your friendly neighbourhood supercomputer if you really want. For sticking them on the web I found
http://www.hackyon.com/jQuery-Tiles/site/ very convenient and straightforward, for what it's worth.
