Lots of people are complaining about this issue on the Apple Support forums.
Some people have some work-arounds but there aren't any explanations of what's going on. I've checked out permissions of the file and they all seem fine. I haven't delved too deep yet but I was wondering if anyone over hear had any ideas.
I myself have suffered from the same problem since the iOS 5 beta on my iPhone 4.
- iOS 5.1 (but I've been experiencing the issue begining with the iOS 5 beta)
- iPhone 4s (but I've been experiencing the issue begining with iOS 5 beta on my iPhone 4)
- Windows Vista Ultimate
- Windows Live Photo Gallery (used for import and editing)
The problem seems to be getting slightly better since some of the photos are now imported with the correct orientation but some are not. In any case I can't edit ANY of the pictures regardless of the correct orientation or not.
Error received when attempting to rotate photo:
Error received when attempting to crop photo: