This problem is addressed in ArcGIS 8.1 Service Pack 1. See the Related Information section to download this pack.
Sometimes a geographic transformation doesn't work correctly in ArcMap. The layer and data frame coordinate systems are geographic coordinates.
When the layer and data frame coordinate systems are geographic, you have to zoom in to see the change in values. The display isn't refreshing properly. The current display extent is checked against the new extent. Because the two extents are the same nothing happens.