DEM produces pixelated hillshade when CRS changed to WGS 84 / UTM

UPDATE:
I now realize my problem with pixelation occurs when I change the CRS to WGS 84 / UTM. Anyone familiar with why this would happen or how to avoid it?

ISSUE:
I am having trouble with hillshade on a QGIS proejct I have been working on for some time. The hillshade I get using a DEM comes out with significant pixelation (See image below). I’ve used the same DEM in a separate project and I don’t get the pixelation at all. I would start a new project except that I have very elaborate Map Themes set up in the original (problematic) project that I can’t seem to transfer to a new project.

A stripped down version of the project QGIS files and layers can be found here:
https://drive.google.com/file/d/1Kt6TwXI2SBzjjT21kUr2MJMXcTVV3YEp/view?usp=sharing

This is the process I use to generate the hillshade in a new project where I don’t get pixelation:

• Open a new QGIS project
• Add the DEM as a raster file
• In symbology
  • Set render type to Hillshade (directly from the dem)
  • Set resampling section to ‘cubic’ in the Zoomed in field.
  • set transparency to 50%
  • Click Apply

If I use the DEM with the above process I get smoothed hillshade from the DEM (no pixelation) but the same DEM produces a pixelated hillshade in my original project. I’ve tried eliminating all other layers to see if it’s a layer conflict but the hillshade is still pixelated even when it’s the only layer. It seems to me that there must be some setting or preference in the old project (linked above) that prevents me from smoothing the hillsahde using resampling.

Anyone have any idea how to fix my original project so resampling can be used to smooth the hillshade?

Here’s a sample of the map with pixelated hilshade.