The influence of shape fluctuations on deformable thermosensitive microgels in aqueous solution is investigated by dynamic light scattering (DLS) and depolarized dynamic light scattering (DDLS). The systems under study consist of a solid core of polystyrene and a thermosensitive shell of cross-linked poly(N-isopropylacrylamide) (PNIPA) without and with embedded palladium nanoparticles. PNIPA is soluble in water but has a lower critical solution temperature at (LCST). Below the LCST the PNIPA shell is swollen. Here we find that besides translational and rotational diffusion, the particles exhibit additional dynamics resulting from shape fluctuations. This leads to a pronounced apparent increase of the rotational diffusion coefficient. Above the transition temperature the shell collapses and provides a rather tight envelope of the core. In this state the dynamics of the shell is frozen, and the core-shell particles behave like hard spheres. A simple physical model is presented to capture and explain the essentials of the coupling of rotational motion and shape fluctuations.