Hi,
You certainly seem to have done all the right steps!
When you looked at the point info in the output shapefile, did you look at the attribute table? The attribute table isn't updated when a dataset is projected because we don't know if you want those values updated. The actual values are stored internally.
Add the output shapefile to a new ArcMap session. What is the data frame's coordinate system set to? You may want to also check the map units (data frame properties, general tab) as the map units reflect the data frame's coordinate system. If you then change the display units to degrees, you can check that the points are in the right location.
How far off is this data relative to the photos? A few feet or meters? Hundreds of meters? Or Kilometers away?
Can you post a sample lat/lon point, plus its corresponding state plane coordinates?
Thanks,
Melita