If I understand you correctly, your suggestion might help diagnose the problem if I had projected the raster image from its original coordinate system. I haven't performed any projections on the image, so it's either in its original coordinate system, or it was projected by someone else before I received the image.
In attempting your solution, I noticed something interesting. I converted the image to polygon (raster to polygon, conversion toolbox), and the resulting polygon has the extent of the image as it is being displayed, rather than the extent shown in the image's source properties. Not sure if that sheds any light on the problem.