Is this a problem? Or is this working as designed?
I don't see this as a problem. After all, on your old point and shoot or SLR cameras, does that screen rotate when you turn it sideways? As long as you know where the buttons are, you don't need them to rotate. It's just a bell and/or whistle that eats up extra computing power.
I guess I didn't explain myself well.... when you take a picture with the phone holding it "up & down" (as in portrait view), then post the picture to the web (or send in text), the picture is sideways.