As I commented on http://wordpress.com/blog/2007/09/22/tags-and-categories/
Great idea - glad to see it’s finally being implemented.
Pity it isn't working quite right yet..
If you click on a tag link under a post which should lead to http://<yourblog>.wordpress.com/tag/<foo> the link redirects to http://<yourblog>.wordpress.com/category/<foo> consequently not showing up a thing (unless you have a category with the same name, in which case it shows the posts in the category not the 'tagged' posts )
Similar behaviour can be observed when using the links in the new 'tag cloud'.
Basically, it looks like the intelligent redirecting is a bit off.
Oh yes, just to make things a little more confusing, the default name for the older 'category cloud' is still 'tag cloud' unless you change it...