That is related to the change that tags now use the correct setup with separate table (before that they were stored within each image and album entry). sbillard knows more about the details why that does not work anymore.
Try using the tag suggest plugin, that will find your tag even if you just type "Happy".
I tried it.. but I liked having them as strings so that i could search for people's names.. i have lots of group photos, and sometimes if i wanted a picture of two people together and stuff, then i like using the boolean search "jim & betty" or something..
Looks like I may be reverting after all.
Thanks for the answers, sbillard. I hope future versions have this implemented!