In project management, what are the unique challenges of managing a
project team vs. a conventional intact team? How do you overcome the
obstacles when faced with team members who report functionally to
another manager and are assigned to multiple projects in the
organization?

Just last night I was helping someone on a consulting
project doing just this.  When you say 'conventional
intact team' are you talking about your organization
versus say a cross-functional team?

This is an entire subject about how to make dual
reporting relationships work as well as how to define
dotted line relationships.  Thanks, and I look forward
to see what the researchers come up with.

Yes, that is exactly what I mean, thanks!

This is going to be a lot of work, but start
checking into stuff on the benefits of 
centralized versus decentralized.  You will
need to dissect what defines your relationship
with the employees, such as:
Promoting
Evaluating
Assigning work
Assigning sub-teams
Raises/bonuses
Training.....

Think of what you need and what you have
to offer.  I had a project this summer where I
had people working for me who were employees
of my client (I was working for a sub).  Getting
some of them to do stuff was almost impossible,
I had no control.  

Might check out GA's Pricing Policy also, this
question is fairly intensive and complex.  Good luck.