** This issue is addressed in ArcGIS 9.0 Service Pack 2 (SP2) **
The IDENTITY and INTERSECT tools in the Analysis Toolbox are merging lines that should not be merged.
This is a known issue.
** This issue is addressed in ArcGIS 9.0 Service Pack 2 (SP2).
Click on the link in Related Information below and download Service Pack 2, if necessary. **
There is no known workaround at this time.