[Regression] Screen rotation broken on GNOME Wayland

Affected version

Fedora 34 Prerelease affecting mutter 40.0~beta on Wayland.

Bug summary

The new updated mutter 40.0~beta broke the screen rotation on GNOME Wayland as tested on HP Envy X360 convertible powered by Ryzen 5 2500u.

Steps to reproduce

1. Update to mutter 40.0~beta
2. Step two
3. ...

What happened

Screen rotation is broken leading to missing button.

What did you expect to happen

Screen rotation should work as intended when positioned in portrait mode.

Relevant logs, screenshots, screencasts etc.

As tested

$monitor-sensor 
    Waiting for iio-sensor-proxy to appear
+++ iio-sensor-proxy appeared
=== Has accelerometer (orientation: normal)
=== No ambient light sensor
=== No proximity sensor
    Accelerometer orientation changed: right-up
    Accelerometer orientation changed: normal

But screen failed to rotate.

Edit: Additional comment form Hans detailing the issue:

[...]the changes from !1710 (merged) are causing touch-mode/auto-rotation issues for quite a few users. 
Esp. them also triggering on a touchpad being present is quite bad. Many convertibles will not disable their touchpad when folded into tablet-mode.
 And even those that do, typically will only stop reporting events, rather then having the touchpad completely go away. So the check added in !1710 (merged) basically is broken for any yoga models, except on those where we have working SW_TABLET_MODE reporting at which point the check is not necessary.