Do you get the same result using all 3 options?
and it could be this issue
Thanks for the reply,
It happens only when using 'Raster Function' on mosaic dateset
When using the 'Hillshade' in geoprocessing or, calculating 'Raster Function' on the original data it looks ok.
I'm doing it on the same mosaic dataset I created on 2.6
Also, in Arc Map 10.7 it looks ok
there is some mention of "mosaic" datasets for one of the parameters
Disable default edge pixel interpolation .... Use this option when the mosaic dataset containing your elevation raster data consists of overlapping items or tiles.
although it seems present in both the 2.6 and 2.7 documentation, but I haven't done a complete comparison between the help topics