Are there any good iPhone camera apps that properly rotate photos?
If any I think ProCam might do this by default. There's no specific settings for where to do the rotation, but if I don't remember wrong it actually rotates the image. I'm not sure if the app is free or costs anything since I got it thru appoftheday for free. 

Have a try. If you want I can check it out further so you don't need to purchase the app?

Edit:

Sorry to dissapoint you. Neither of the apps: ProCam, Awesomemize or Awesome Camera does this. I tested all of them by taking a photo upside down and mailing it to myself. The image arriving on my computer was also upside down. 

If youre into code you should have a look at whats going wrong and how to fix it: 
http://pleaselistencarefully.com/Why-photo-rotation-is-broken-on-the-iphone-4-and-how-to-fix-it-using-paperclip-on-heroku