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** This issue is addressed in ArcGIS 9.0 Service Pack 3 (SP3) **
When using overlapping elevation data the application should pick the highest resolution data and use that as the elevation source. This works correctly for on-demand data caching of elevation data but has the following problems when full data cache is generated for the same data.
If you have two or more overlapping elevation data sources where the no-data area of one elevation overlaps the data area of another layer, the no-data area cells should be ignored and ArcGlobe should use the elevation layer(s) that contain valid elevation data. Currently, when these types of elevation layers are visible at the same time, the no-data areas of an elevation data layer can 'knock out' valid data areas of an overlapping elevation data source.