If you create a dynamic block and it doesn't work the way you expect it to, the first thing to check is your selection sets.
For example, you have a block that contains a rotate and a stretch action. You use the rotate grip, and notice that your stretch grip is now off in space somewhere.
This is probably the most common problem I see in dynamic blocks, and it's caused by including actions in the selection set for another action. Including parameters is okay, and usually good, but including actions almost always produces unexpected actions.
In the rotate and stretch example, the weird behavior is because the stretch action was accidentally included in the rotation action's selection set. Take it out, and you're up and running again.
So if you've got a misbehaving dynamic block on your hands, look at all your selection sets and make sure you don't have any actions sneaking in where they shouldn't be.