That "scrunching" is actually normal.

The bigger problem is rotate is that [for me] it breaks often and also a lot of the guides don't work for the newest Diablo release.

Rotation is unfortunately not officially supported. You may want to uncheck any toolbar applets that you don't need if the overlap is problematic (limited room; title bars preallocate space). Also I know someone was working on a vertical fullscreen onscreen "finger" keyboard but I don't what came of it.

There is another built-in keyboard that can be chosen: Settings>Control Panel>Text Input Settings>On-screen>Launch finger keyboard set to "With finger" instead of "With finger and stylus".

I think Personal Launcher would help with the Applications menu problem.

It's unfortunate we don't have proper rotation support (even have to flash a modified kernel to get it working which has bricked my device on more than one occasion -- requiring usb flash)

Good luck