I agree. For the Nexus 7, this limitation doesn't make sense. As soon as I saw the landscape mode description when reading about the update, I read the user comments. All the Nexus 7 owners hated it, so I decided to not do the update for now. My guess is that it will be updated again to allow for both portrait and landscape mode.
What I'd like to see is an option for the camera to shoot in landscape mode while holding the tablet in portrait, assuming that's technically possible.