Okay, I found some interesting results. I ran verbose debug mode on the 1.658 beta, and attached the log file along with a copy of the log file and my mame.ini file (just in case its needed, but I don't think it will). Prior to this, I also checked out the mame.ini file, and the same rol, ror, etc variables are both present and function as expected. I tested them simply by running mame without Mala running.
Procedure
After Mala starts up, I navigated to the MAME gamelist. Once there, I went over to the side controller panel successfully had Mala rotate by pressing one of the buttons. I started up a game while Mala was vertical, the game ran horizontal, and exited. After that, I went to a different game with Mala horizontal, played with the game horizontal, and quit. Then I exited from Mala. No error messages during the session (thats normal behavior)
Also, in a session other than the log file attached, I tried playing around with the Mame.ini file in combination with Mala. First, I changed both flipx & y to 1, and ran Mala after. Unlike in my tests running MAME directly, the game ran in the normal rotation (should have been fliped 180). Upon inspection, the Mame.ini file variables were changed back to zero. The same came of changing rol and ror to 1; the game ran horizontally if you started Mala after saving the Mame.ini file. However, when I tried changing the variables after starting Mala, the games were rotated accordingly.
Log File
Mala looks for the Mame.ini file at startup. At line 22, Mala realizes that 'mameui32.ini' is not the right ini file to change for rotation (its correct). Line 23, it can't find mame.ini in the mame.exe directory. At line 24, surprisingly, Mala finds Mame.ini in the correct subdirectory. Then, at line 25, it actually modifies the mame.ini file successfully (evidence from my Mame testing points to Mala changing the rotation variables to 0).
Later, when I actually press the side-controller button to have Mala rotate, it's registered at line 174. However, after stating that the button is in a different controller set and such, line 180 only states that rotation is required. Unlike in line 25, there is no 'modify' step.
Conclusions
To my surprise, Mala is finding my Mame.ini file. Also, it can (and does!) alter it successfully at startup, changing the ror, rol, flipx, and flipy variables to 0. However, the change of any of these to 1 is not happening when Mala rotates. I have two theorys. 1) Mala is somehow forgeting (or not storing) the location of the Mame.ini file once Mala finds it and alters it at startup. Or, 2) Mala knows to rotate its own display, but is for some reason not altering the mame.ini file at the same time. It could be something else, of course, too.
Well, that was long.

I hope that helps. Again, thanks for the time and help!