* I have discovered my mistake *
I should have been pathing through the UTM NAD83 Datum Category instead of USA Wisconsin.
Recently upgraded to Autodesk 2008 Civil 3D and Raster Design 2008 from 2007. Getting this error "The correlation data for this image yields an invalid transformation based on the coordinate system specified. Please check to make sure the coordinate system selected and the correlation source selected for this image are correct." when attempting to insert a 2005 Wisconsin NAIP image using the World File Correlation source. The zone set in the dwg file is "Wisconsin County Systems: Bayfield County, US Foot". The resolution is 1-meter pixel and the projection is UTM NAD 83 Zone 15N. During insertion I select the Transform tab and set the image code to "NAD83 Wisconsin State Planes, North Zone, Meter. With this release of Raster Design there is no longer a selection for the numeric zone such as "NAD83 Wisconsin State Planes, 15N, Meter" as you could in Raster Design 2007. I continue to get the error "The coordinate system chosen for this image is invalid".