Hello and greetings!
Please take a look at the following Knowledge Base - Technical Article Why are there raster artifacts visible in hillshade results when something is performed on a project...
Hope this helps.
Thank you.
Yes, I am aware that the problem existed early in ArcGIS 9, but the note at the bottom of the page indicates it was corrected in later versions. I'm using ArcGIS 10.
I think the problem mentioned on the note of the knowledge base article is that in ArcGIS 9.0, even if you select bilinear or cubic, it always uses nearest (default). This issue was fixed on 9.1. However, even in 10 nearest is the default resampling technique for project raster tool. Please make sure you are using either Bilinear or Cubic when projecting the DEM (as in screen capture below). If you still seeing the artifacts after this, I would suggest you to log a support incident so that we can look into this.
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Q. Will the striping, evident in level 1 DEM's, be eliminated in the NED processing?
A. The striping is in the original source DEM's that were processed as Level 1 using the GPMII or Manual Profile methods. Any DEMs that are produced by photogrammatic methods are considered to be Level 1. Level 1 Methods are:
Manual Profiling--- Operator used stereoplotters to create orthophotos in the 1970's and 1980's while simultaneously creating digital profile information for DEMs.
This method produced the "stripping" seen in some level 1 DEMs.
GPM2 (Gestalt Photo Mapper Model 2)--- This was an instrument that was semi automated to produce orthophotos and DEMs at the same time from photography.
GPM2 DEMs can have an appearance of a grid pattern when a shaded relief graphic is produced from the DEM.
The filtering process used for NED production does not filter out all of these areas. As new DEM's (Level 2 or 3) are produced for these areas, they will replace the Level 1 source.
Q. When resampling NED, should I use Cubic Convolution, Bilinear interpolation or Nearest Neighbor?
A. Cubic Convolution and Bilinear Interpolation are the preferred methods of resampling digital elevation data, and will result in a smoother appearance. Nearest Neighbor has a tendency to leave artifacts such as stairstepping and periodic striping in the data which may not be apparent when viewing the elevation data but might affect the derivatives, such as shaded relief or slope.