What are the effects of rotating airfoil sections to match wing's dihedral?
All you do by not tilting the airfoil (around its longitudinal axis) is to reduce the relative thickness of the wing. Since that effect is proportional to the cosine of the dihedral angle, the effect is negligible for realistic values of dihedral.

Lift will most certainly not be affected, because it, being at its root a pressure, always acts perpendicular to the local surface.