Q:

What are the effects of rotating airfoil sections to match wing's dihedral?

While designing a wing, what are the advantages and disadvantages of rotating the airfoil sections to match a linear dihedral (airfoil sections always perpendicular to the dihedral line)? Does the lift force component tilts inwards and because of that, horizontal component  cancels out and there is a decrease in lift? 

A:

All you do by not tilting the airfoil (around its longitudinal axis) is to reduce the relative thickness of the wing. Since that effect is proportional to the cosine of the dihedral angle, the effect is negligible for realistic values of dihedral.
Lift will most certainly not be affected, because it, being at its root a pressure, always acts perpendicular to the local surface.

