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@Mr.T - "Transforms use interpolation in just the same way that re-sampling does. Anything BUT 'Nearest Neighbor' will interpolate the image with anti-aliasing...bicubic, bicubic smoother, bilinear etc".

It never ceases to amaze me how many otherwise knowledgeable PS people don't know this.  Not only does this cause problems such as described above, even something as simple as rotation of a photo by a few degrees to level the horizon will cause a loss of sharpness at the pixel level. Do a few rotations in a row (ie, instead of using a smart object), and the degradation in image quality can be noticeable, even by non-pixel-peepers.  However, in photography and many other applications of PS, there is absolutely no way a nearest neighbor interpolation can be used for rotations because of all the stair-step artifacts it introduces. 

AFAIK, the only ways around this are:

a) Use a smart object if you can live with the blurring from one rotation, but you may need to tweak the angle several times; or,

b) Up-rez the image by a large factor, do the rotation, and then down-rez the rotated version by the same factor.  Doing nothing more than up- and down-rez'ing an image introduces its own artifacts, but often these are smaller / more acceptable than the smart object approach.

Tom M