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A raster that has rational polynomial coefficients (RPC) can be orthorectified on-the-fly. For more accuracy, a digital elevation model (DEM) can be used in the orthorectification process.
When the georeferencing tools are used on the orthorectified layer, the elevation choice reverts to 'constant elevation', instead of DEM.
The orthorectification type is reverted to constant elevation when any georeferencing tools are used on the DEM orthorectificed raster.
Persist the orthorectification to a new file and georeference it.