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Is the default magento sitemap.xml optimized as is for ecommerce products? I'm thinking about adding image links as well. Is it worth time investing in this for SEO gains?

<url>
   <loc>
      http://demo.com/product.html
   </loc>
       <lastmod>2011-08-03</lastmod>
       <changefreq>always</changefreq>
       <priority>1.0</priority>
</url>
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Your snippet above is about all there is to the sitemap protocol, so basically yes.
Adding images to the sitemap is actually an extension, and wouldn't be a bad idea.

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