I had a fight with Arc 9.3 today. It refused to load a 4 GB GeoTIFF that was provided to me. It was a 1.0 m DEM. It didn't even bother to try reading the raster into memory. It simply failed with a generic error message. Arc 10 on a different workstation could load it, however. Drat. I had to install Arc 10 today on my own workstation. Good thing I can choose to create Arc 9.3 geodatabases with the appropriate tool.
Interestingly, Arc 9.3 is fine with massive GRID or Imagine rasters. Sort of. Actually, on my workstation, you really shouldn't bother.
In this case I needed a slope map. I also needed 20 ft contours. I didn't want to split the raster into pieces. Clearly, for this project, the answer was to resample the data to a larger cell size. This speeds up geoprocessing exponentially. Just be sure to do it reasonably.
Tomorrow I will map out geomorphic features of a 2 or 5 m DEM using slope class among other things. I love my job.