200,000 images in single folder in linux, performance issue or not?

Ext3 uses tree to hold directory contents, so its capability to handle a large number of files in a single directory is better than that of those file systems with linear directory listings. Here you can read the description of the tree used to keep directory contents.

However, 200K files is still a huge number. It's reasonable to move them into subdirectories based on first n characters of file names. This approach lets you keep only file names and not directory names, and when you need to access the file, you know where (in which subdirectory) to look for it.

This seems to have been answered at the below link.

https://serverfault.com/questions/43133/filesystem-large-number-of-files-in-a-single-directory

I know an answer was chosen, I want to add a solution on improving the performance, for interest

Querying the directory listing each time will cost the most overhead, if the directory listing returns all results every time.

You can improve performance by storing the listing in an indexed database (say SQLite) and just query the results from there. You can select a subset of records and implement pagination much easier this way, and filter the results too.