I took another look at this and the answer is that ThemeRoller for jQueryMobile is only compatible with 1.0.x release of jQM.
Todd Parker Answered the question here in the jQueryMobile issue tracker.
Tyler Benzinger Answered the question here in the Theme Roller issue tracker.
It seems we will have to wait for Theme Roller to support version 1.1 themes.
Update: Solution
In your theme.css comment out or delete the .ui-icon-loading section and insert the following (from the 1.1-rc1 css)
/* loading screen */
.ui-loading .ui-loader { display: block; }
.ui-loader { display: none; z-index: 9999999; position: fixed; top: 50%; box-shadow: 0 1px 1px -1px #fff; left: 50%; border:0; }
.ui-loader-default { background: none; opacity: .18; width: 46px; height: 46px; margin-left: -23px; margin-top: -23px; }
.ui-loader-verbose { width: 200px; opacity: .88; height: auto; margin-left: -110px; margin-top: -43px; padding: 10px; }
.ui-loader-default h1 { font-size: 0; width: 0; height: 0; overflow: hidden; }
.ui-loader-verbose h1 { font-size: 16px; margin: 0; text-align: center; }
.ui-loader .ui-icon { background-color: #000; display: block; margin: 0; width: 44px; height: 44px; padding: 1px; -webkit-border-radius: 36px; -moz-border-radiu$
.ui-loader-verbose .ui-icon { margin: 0 auto 10px; opacity: .75; }
.ui-loader-textonly { padding: 15px; margin-left: -115px; }
.ui-loader-textonly .ui-icon { display: none; }
.ui-loader-fakefix { position: absolute; }
/* loading icon */
.ui-icon-loading {
background: url(images/ajax-loader.gif);
background-size: 46px 46px;
}
Make sure you have the new ajax-loader.gif file in the theme images folder.