That's a good idea, though I'm pretty sure it has to do with the orientation of the camera sensor and cannot be accomplished with a simple software feature.
Yes, that is the reason.
However, there is a pretty simple fix. There could be an added mode called something like "maintain horizontal aspect" and all that would do is force the screen to not readjust to its orientation. So if you held the phone vertically in this mode, everything will look sideways. So you'd essentially be forced to turn the phone to the horizontal orientation to see things properly.