Modified the order so rotation happens before resizing

gallery_image.rb

class GalleryImage < ActiveRecord::Base
	belongs_to :property
	has_attached_file :image, :styles => {:small => "300x300#",
                                        :medium => "575x420>",
                                        :small_thumb => "95x95#",
                                        :thumb => "100x100#",
                                        :large => "550x550>",
                                        :featured => "296x477!"},
	                  :default_style => :small,
                          :processors => [:rotator]
                    
  attr_accessor :rotation_degrees, :rotate
  
  before_create :set_defaults
  

  def rotate!(degrees = 90)
    self.rotation += degrees
    self.rotation -= 360 if self.rotation >= 360
    self.rotation += 360 if self.rotation <= -360
    
    self.rotate = true
    self.image.reprocess!
    self.save
  end
  
  def rotating?
    !self.rotation.nil? and self.rotate
  end

  private
  def set_defaults
    self.rotation ||= 0
  end
end

gallery_images_controller.rb

class GalleryImagesController < ApplicationController
  def rotate
    @image = GalleryImage.find(params[:id])
    rotation = params[:deg].to_f
    rotation ||= 90 # Optional, otherwise, check for nil!
    
    @image.rotate!(rotation)
    flash[:notice] = "The image has been rotated"
  end

end

rotator.rb

module Paperclip
  class Rotator < Thumbnail
    def transformation_command
      if rotate_command
        # having the "super" at the end ensures that your thumbnails are allways "inside the limits of your styles"
        rotate_command + super 
      else
        super
      end
    end
    
    def rotate_command
      target = @attachment.instance
      if target.rotating?
        " -rotate #{target.rotation}"
      end
    end
  end
end