Repro steps:
1. Open project "wheelRotation.zip";
2. Play the scene;
3. For details, check out user's description or watch video below;

Watch example video: http://screencast.com/t/vNqu936T8qx
At first, you can see how script works and after uncommenting line "transform.localScale = transform.localScale;" you can see expected behavior.

I am creating a 'skewed wheel' effect for a racing game. the expected behaviour is that a child of a scaled parent takes on the scale of the parent and creates a 'skewed' rotation effect. Instead during play mode the child acts as if it has the scale applied to itself and not its parent. Note that the expected behaviour DOES happen in edit mode when editing child rotation.