Scenario 2 is the correct behavior.
When you detach the keyboard from your Surface Pro 11:
Rotation lock should be OFF -allowing auto-rotation.
, and the display rotates as you move the device.
The orientation sensors respond correctly, and the screen should respond to the physical orientation of the device.
In case of Scenario 1:
A sensor driver that's crashing or getting into an invalid state
HID sensor collection driver or the Sensor Monitoring Service not re‑initializing properly after keyboard detach.
You should try to:
Press Win + R → type services.msc → restart Sensor Monitoring Service.
Open Device Manager > Expand Sensors > Right click HID Sensor Collection V2 >Disable Service > Enable Service.
Run Surface Diagnostic Toolkit