Recently practice and witness the following, which is reproducible in ArcGIS 10.4.1 and 10.5.1:
- ArcGIS built-in (3-parameter) transformation between WGS84 and local datum, called 'Option 1' used by default in Mosaic Dataset;
- A more accurate (5-parameter) custom transform between WGS84 and local datum, called 'Option 2', which is planned to take over Option 1 in Mosaic Dataset
- Option 2 is customized, which is also configured via Environment Settings (for takeover of Option 1), where NADCON file is managed under C:\Program Files (x86)\ArcGIS\Desktop10.5\pedata\nadcon folder
- When images with WGS84 (UTM) are loaded into a Mosaic Dataset (with local datum), the Option 2 is not functional, which still uses Option 1 for the transformation. It looks no takeover at all.
- However, if those images are directly loaded into ArcMap, it demonstrates two options: Option 1 and Option 2. When the Option 2 is selected, the transformation works fine.