OK, so what I perceived as reflections are really radical differences in exposure.
I'm thinking maybe that's the problem - the individual frames are just too far apart in exposure, and possibly color-balance.
Did you shoot raw? If so, you could consider dragging all the images into Photoshop so they open in Camera Raw, then normalizing the exposures by hand (e.g., using the Exposure slider). When done, save all the images as PSD files, then run the Photomerge on those.
Photoshop is not bothered by different exposures when it does it photomerge. In fact, it does a beautiful job. But I discovered that the sheer number of images just is too much. What I can do, is to stich together each vertical array of images. Then stitch together these arrays again. More work that I had planned for, but the result is promising.
Here is the result of doing this: Two vertical arrays of images stitched together, then these two vertical "stripes" stitched together again. This way I can work my way throught the complete image, I think.
It would be impossible to take this picture with one single shot, with any lens I am aware of, within reach of my budget. I can post the final image when it is ready, if someone is interested.
I think the problem here is parallax error.
With shots like this you really need to rotate the camera strictly around the optical center of the lens - not the camera screw mount, and certainly not handheld. Use a tripod with a pano head, which allows you to retract the camera along a rail and lock the position. If you need up and down as well it can get tricky.
The optical center is where the diaphragm appears to be when you look into the lens from the front. Of course that's not where it really is...
(What's the final pixel size of this thing? I'm gearing up for an interesting assignment I just got, billboards at high resolution, that will end up at around 10 000 x 15 000 pixels. I need to make 20 of these, using, it seems, my 12 mp Nikon. I have a digital back on order, but it won't arrive in time. So I have a lot of stitching ahead...)
you are absolutely right. As I mentioned above, I wanted to try this. I ran a batch on all 84 images, downsized them to 10% (500 pixels with each of them) and Photoshop churned out this beautiful panorama in less than a minute:
This means I can experiment and downsize the images only that much that PS will not choke under the load.
The conclusion for me so far is that image sizes matter, exposure and other factors are of less importance, as long as PS can recognize the patterns betwewen the images. The claim I saw on the Internet that PS does not like too much overlapped photos when it does its photomerge, does not seem to affect my panorama at all.
I have had no problems with handheld and stitching.
Well, maybe so, but there is some funny stuff going on with the roof tiles in the foreground if you look closely. Even if it won't stop the process, it's still good practice to try to minimize parallax errors. I'm not making this up: http://en.wikipedia.org/wiki/Parallax
The further away everything is, the less it matters. It's when you get things close that a small camera movement can throw alignment completely off.