1) Opened the DGN file in XM or V8i.
2) In Workspace > Configuration > New
3) Variable: MS_RASTER_IGNORE_INGRTAGS_WITH_GEOTIFFTAGS
4) Variable Value: 1
5) Detach the TIFF image.
6) Exit MicroStation completely.
7) Go into MicroStation
8) Attach the TIFF image.
9) Double click on the raster image in Raster Manager. If the variable is being recognized correctly in Element Information > Image > Format will show as GEOTIFF. If it shows INGR TIFF then it is not recognizing the Environment Variable correctly.