There are two changes in 3.5 that affect existing projects:
Disable inherit scale works differently.
Unfortunately this is causing your problem. The previous disable inherit scale was unstable, in certain situations it would completely freak out. For example, if your character was flipped to face the other way, bones with disable inherit scale would sometimes rotate wildly. This kind of instability is really, really bad and there was no workaround except to not use disable inherit scale, or hope you never encountered a situation where it exploded. It was work correctly as far as the math is concerned, but the results are just not what we want. We tried very hard to come up with alternative math to keep the old behavior, but it proved to be impossible to make it stable in all configurations. In the end we were forced to change the behavior: scale now affects rotation even when inherit scale is disabled. With that change we have made the feature stable in all situations. Unfortunately projects that relied on the old behavior will have to updated. This is something we don't do lightly and try to avoid at all costs, but in this case it was the only option. There are likely a couple ways to get similar results to the old behavior, such as transform constraints or keying rotation. Another option is to stay at 3.4.02.
Disable inherit rotation works differently.
Similar to disable inherit scale, the old implementation of disable inherit rotation was unstable in some situations. To fix it, the change we had to make was that reflection is disabled when inherit rotation is disabled.
