I have found several threads raising this issue, but none has been resolved.
To answer the questions above,
I have tried the "Create Ortho-Corrected Raster Dataset" tool with both single-band and 4-band .tif files - both produce the same 000425 error message.
I am using a DEM to orthocorrect
Bit depth is 16
I am using .tif as the output format.
I have no rpc information
I am working in ArcGIS 10.1 SP1
The error message 000425 appears almost instantaneously as the tool begins to operate.
Thanks