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Tile boundaries (linear artifacts) become very apparent if transparency is turned on for a raster layer draped on a raster surface. The boundaries are more apparent the closer you get and are visible from any angle (oblique or not). In more limited cases, overlapping geometry between tile boundaries is apparent whether transparency is set or not.
This is a known issue.
This problem is addressed in ArcGIS 8.1 Service Pack 1. See Related Information section to download this pack.