Before iOS 4 - jailbreak software changes could do this.
For iOS 4 and later, the lock function easily sets a portrait mode for all apps that run in both portrait and landscape.
You can lock the screen rotation on the iPhone 3GS and 4, running iOS 4, to portrait only by double pressing the Home button (bringing up the task switcher), swiping right to show the media controls and pressing the left most icon (looks like a refresh button), the rotation lock. When locked you will see a padlock in the icon and a new status bar icon of the same design.
Note: this does not affect applications which only run in landscape mode, such as most games.
Edit: Video of how to do this: http://www.youtube.com/watch?v=xYkUzYXtZT0
This is currently exactly how the iPhone is designed. I agree with your issue.
My answer was about to be: "Perhaps if you Jailbroke your iPhone you could install some modification software that would prevent someone from shutting it down when locked". However, there's naturally yet another level of indirection.
One of the things that you will never be able to prevent, is the device being put into DFU mode. A phone is put into DFU mode by holding down both the Sleep and Home buttons for 10 seconds, then let go of only the Sleep button (continue holding the Home button) until the phone wakes with it's "connect to iTunes" notice.
DFU mode is one of the few pure hardware modes. After putting a phone into DFU mode, it cannot be used until restored against an instance of iTunes. Which also means that the data will invariably be lost because it will be wiped upon restore of new phone setup.
A few notes:
No computer is completely secure when physical access is allowed by an unauthorized user. No amount of BIOS passwords, login passwords, or anything extended authentication will be unable to be overcome. Physical access is total access.
What I'm saying is that you should spend less of your time attempting to thwart theft, and instead set up a mechanism for safeguarding your data.
Sync regularly, configure your iPhone to wipe itself after 10 failed pin attempts, set up Find My iPhone so you can issue a Remote Wipe command.
Note that I'm not saying not to not bother mitigating theft. Getting a K-Lock if you're in a display position, a secure case so it's harder to lift from your pockets (or don't put it in your pants pocket) are all worthwhile steps to take.
Best Answer
If you're running iOS 6: Double-tap the home button. Swipe to the right (as if scrolling left). There's a button with a rotating arrow with a lock that toggles rotation lock.
If you're running iOS 7 or 8: Swipe up from the bottom of your screen to open Control Center; you may need to unlock your phone first. The rightmost button on the top of Control Center is a similar rotating arrow with a lock.