This is simply incorrect.

1. I have examined the _resized images for various galleries and they all look fine.

2. Have a look at image.php around line 232.

if( $dims = $this->resize_dimensions( $orig_w, $orig_h, $dest_w, $dest_h, true ) ) {

When I change the last ( $crop ) parameter in resize_dimensions() from true to false, the Preview size image is no longer cropped from the center.. not the watermark.. the entire image.

Put another way: the standard code, which is set to true, crops from the center to a square, cutting off the top and bottom of tall images.

Maybe this is tied to my other issue with watermarks, but this is not about watermarks.