It works with a rotated screen. However, the screen must be rotated when the app starts up, not afterwards.
Personally, I use this with USB networking configured to autostart. That way, I can just plug in the Kindle, press "Shift V U" and get going.
Windows users check out kranu's "eMonitor" thread
. The software does a similar things and kranu mentions ways how to set up a virtual second display for Windows. I'm not to sure how to run vnc on one display out of many, though. I recommend to start with cloning your existing desktop. You'll probably want your kindle in landscape mode for that, so do the rotation before starting kindlevncviewer.