Related to Bug 6672 ("EXIF orientation (rotation information from digital cameras) should be used in images (edit)") is marked as resolved, and they are used.
However, as already noted in bug 6672, there are problems that images are effectively rotated, but the display uses the unrotated length/width, effectively strongly skewing the image. This problem is assumed to be fixed in bug 6672, but at least in 1.18alpha (r95811) it is not.
Two examples uploaded:
http://species-id.net/openmedia/File:Test-tagged-rotation.JPG contains an original Canon-produced EXIF rotation tag and was uploaded unmodified.
It is displayed in portrait mode (YES... it is rotated...), but with the lenght/width settings in landscape mode.
For comparison, the same image without a rotation tag, directly rotated with jpg lossless rotation:
The bug is critical, it breaks using 1.18 on any site that uses images containing EXIF rotation tags.