Thanks for the advice. Alas, my arcMap 9.3 crashes every time it tries to read the tfw file, whether I prioritize the tfw or not(in tools, options, raster, use world file). The geotiff file you posted reprojects so easily, just following all the defaults. By any chance do you have a geotiff of NE II, 10m, large size, with water and drainage basins? Or NE I, 10m, large size, with water and drainage basins? Thanks again for your help, much appreciated by a newb.
Forgot to add, your temporary GeoTIFF file at http://www.nacis.org/naturalearth/temp/NE1_LR_LC_SR_GEOTIFF.zip reprojects fine. Forgive me if I can’t find a GeoTIFF of Natural Earth 2 with water features and drainage basins. Any pointers?