Projection on-the-fly for raster does not support datum transformation

Description

When a raster with a spatial reference, such as UTM13N NAD27, is projected on-the-fly to another datum, such as UTM13N NAD83, the two images may not line up properly when displayed in ArcMap.

Cause

Datum transformation is not supported with rasters. This is a known issue with ArcGIS 8.1.

Solution or Workaround