When I attempt to display vectors or rasters over a DEM with VE set to > 0 the end result is a choppy mess. I have tried both standard 2D shapefiles and rasters and get the same results.
Is this a known arcScene issue or is my video card/RAM not powerful enough to dispaly more than one layer in ArcScene?
I would recommend the site that tests your system against minimum requirements for ArcGlobe. That should give you a basic assessment of your system. Also bear in mind that ArcScene depends greatly on the available memory, so shut down other programs that may use a lot of memory to improve performance. There are some other tips for optimization here.
Finally, I recommend using a projected coordinate system if you plan on using the vertical exaggeration. The geographic coordinate system data seems to create an undesired effect.
How did the tests go with the evaluation of your system? Since you are using what is probably a meters based equal area right? What I was trying to point out is that when you have a coordinate system with decimal degrees as the horizontal unit, ArcScene does not resolve it well.
