Your idea about replacing embedded preview in batch is not new to me -to tell the truth, I myself am very interested on that too.
The problem is not how to implemement this in GUI, but:
When you convert from CR2 to JPG, resulting image is automatically properly oriented: horizontal or vertical. The problem (I have) is: embedded preview must always be horizontal! -and this is the only reason why this option hasn't been made yet.
Preffered scenario would be, JPG images can be used as they come from raw converter (so user wouldn't bother about orientation issue). This implies checking CR2 Orientation tag first, then applying "reverse" (lossless, of course) rotation of JPG, and then embedding image.
Yes, I'm quite sure it can be done... but right now, it seems to be somehow slow for large amount of files -on the other hand, maybe it's better having slow option than no option :-)
PS: Almost forgot... if Phil has any "shortcut" by hand... :-)