There is some potentially unexpected behavior in the album thumbnail, timeline picon, and image preview Studio when rotating images in Windows outside of Studio. When an image is rotated in Windows, the rotation will not be updated properly in Studio. The behavior is slightly different in Windows XP and Vista.
In Windows XP when the image is rotated the album thumbnail will also rotate, but the timeline picon and image preview will not update. Once the project in Studio is saved, the album thumbnail, timeline picon, and will display the rotated image properly.
In Windows Vista when the image is rotated the album thumbnail, timeline picon, and image preview are not updated. Once the project in Studio is saved, the timeline picon and image preview are corrected, but the album thumbnail is still not rotated. Navigating away from the photo tab and then coming back to the photo tab should correct the album thumbnail.
This can be avoided by rotating images in Studio rather than in Windows Explorer. This can be done either by right clicking on the image in Studio and selecting Rotate Original or by using the Standard RTFX > Rotate plugin.