It appears to be filtering tags and categories to "top" posts only, so tags that match stories that aren't on the top page don't show.

Yes, that's it. Both tags and categories default to "popular", then you can click the sort links, e.g. "upcoming", "latest", "all" etc. to see posts that match those statuses.

For a brand new site, it feels really weird, like it's broken. But for a site with hundreds or thousands of posts, it works quite nicely, filtering to the best posts first.

So the question is, should they default to the "All" tab or the "Popular" tab? This might have to go to a vote. Either way, I'll close this as invalid since it's technically not a bug.