Users have begun getting images with world/sister files and the coordinate are in lat/long and not the usual state plane coordinates. User's dgn file is in State Plane Coordinate System. In the preferences for raster manager there is not an option to set the units to lat/long.
First go to workspace - preferences - raster manager - georeference and set the Sister file default unit to Meters. Then make sure the option "use sister file if present for georeferenced files" is checked.
A State Plane Geographic Coordinate System also needs to be assigned to the dgn file. This can vary and can be found by going to tools - geographics - select geographic coordinate system from library. Then choose the appropriate State Plane Coordinate System from the list. These are found uncer Library - Projected (northing,easting....).
Now in raster manager go to file - attach - raster and browse to the image to attach. In this dialog make sure the "Open Settings Dialog" option is checked before you choose the image and click Open.
In the Settings Dialog find the Inherit GeoCS from Model option in the Geometry section and set it to "Not Inherited". Now click on attach.
Once the image is attached double click on the image name in raster manager to open the Element Information dialog for the image. Expand the Geocoding option in the Geometry section. Here you should see "Name" which is probably blank. Click in the blank area to the right of Name and select "Select Geographic Coordinate System from Library" icon which is the middle icon. Now look under Library - Geographic (latitude, longitude) - North America. You should see 3 other folders listed and then some Coordinate Systems listed below these. The third GCS is the one to choose. It is LL83 - NAD83 Lat/Long's, Degrees, -180==>+180. Choose this one and click OK.
The image should now reproject to the correct location.