How big is the drive? If you want 500 GB from a 10 TB drive, taking an image of the full drive would mean reading 20 times more data. Asking a failing drive to read a bunch of unallocated space that you don't care about isn't great.

But, sequential reading is very important to rotational hard drive performance.

So it mostly comes down to how sequential your 500 GB of important data is likely to be. If your 500 GB of important data is a hundred 5 GB files, they're probably mostly stored sequentially on the disk and you would do better to attempt to recover them through the filesystem (mounted read-only). If your 500 GB of important data is in a hundred million 4k files, reading them out through the filesystem will likely be much slower and rougher on the drive than imaging the whole drive.