The FITS standard doesn't specify if the origin is at the bottom-left (Y going up), as is used in math and physics, or at the top-left (Y going down), as is often used for computer graphics. There is no right or wrong here, and early on in the development of Observatory it was decided to use the bottom-left. That caused a problem though when support for XISF (PixInsight native format) was added, as this format does explicitly specify the top-left as origin. So to at least be consistent when displaying an image in FITS or XISF format, the image is indeed flipped for XISF. I should have just changed the origin back then already, as this has been brought up several times. I am indeed considering switching the origin to the top-left, as it is more consistent with other software, and consistent with XISF, but I didn't make up my mind yet for the least impactful approach.
As for your plate solving issue, I doubt it is related to the image orientation. The plate solver is known to have issues with wide field images, and this image covers approximately 10 square degrees.