It has to lay flat as the cylinder shape is orientated that way (think tree trunks which is the most used reason for cylinder shapes).
You just have to rotate it so the axis is wherever you need it to be at run time.
Barrels are cylinders btw, check out the fpe I think it is collisionmode=3.
There is a wheel in entitybank\Scenery btw, just change the fpe to make it collisionmode=3.
Been there, done that, got all the T-Shirts!
