Thanks to those that took a moment for a constructive answer! Turns out that using the embed/object parameters slightly differently solves both the thumbnail and auto-orientation issues.
We use JS to handle tracking - we need to know how much of the video the user watched, if they muted it extensively, etc. due to the credit requirements of one of our clients. We'd love to deliver an iPhone-capable version of the site, but without scripting capability it won't happen.