custom Taxonomy breaks tags

hello,
I am modifying a child of the starkers theme to create a portfolio site. I am trying to use a custom post type for the individual items. that works well but now I want to add a custom taxonomy so I can filter them. I found the code I needed on line, and when I put it in functions.php it works, and the menu item shows up on the left side menu bar. but now I have run into two problems.

• The first is that now if I go to the “Tags” menu item for regular posts, and click view under a tag, I get the 404 page. if I remove the custom taxonomy but leave the custom post type. this problem goes away and I am able to and a page listing all posts with that tag shows up, as it should. does anyone know why that is? or how I can fix it?
• The second problem is that with the custom taxonomy code left in. When I go to the link that is created under the custom post type I can create new “tags” like I should be able to (little T because they are created under the custom post type and not under regular posts, IDK if that makes a difference). I can then go edit the custom posts add add the tags to them just like on regular posts. so far so good. when I go back to the custom “tags” page the “tags” say on the right side that they were applied to x number of posts. just like they are supposed to. however at this point if I click on view (it pops up under the “tag” when you hover) the page is found but it says that there are no posts in that section. ?????? I don’t understand, in the admin section it says there are posts but the front says there aren’t. have I missed something?

sorry for the long post. I can’t give you a lnik because the site is on a local xampp server.

here is the code I used:

<?php
add_action( 'init', 'create_project_taxonomies', 0 );

function create_project_taxonomies()
{
// Initialize New Taxonomy Labels
  $labels = array(
	'name' => _x( 'Tags', 'taxonomy general name' ),
	'singular_name' => _x( 'Tag', 'taxonomy singular name' ),
	'search_items' =>  __( 'Search Types' ),
	'all_items' => __( 'All Tags' ),
	'parent_item' => __( 'Parent Tag' ),
	'parent_item_colon' => __( 'Parent Tag:' ),
	'edit_item' => __( 'Edit Tags' ),
	'update_item' => __( 'Update Tag' ),
	'add_new_item' => __( 'Add New Tag' ),
	'new_item_name' => __( 'New Tag Name' ),
  );
// Custom taxonomy for Project Tags
register_taxonomy('tag',array('project'), array(
	'hierarchical' => false,
	'labels' => $labels,
	'show_ui' => true,
	'query_var' => true,
  ));
 }

/*--- Creating custom post type for project --*/
add_action('init', 'project_custom_init');

/*-- Custom Post Init Begin --*/
function project_custom_init()
{
  $labels = array(
	'name' => _x('Projects', 'post type general name'),
	'singular_name' => _x('Project', 'post type singular name'),
	'add_new' => _x('Add New', 'project'),
	'add_new_item' => __('Add New Project'),
	'edit_item' => __('Edit Project'),
	'new_item' => __('New Project'),
	'view_item' => __('View Project'),
	'search_items' => __('Search Projects'),
	'not_found' =>  __('No projects found'),
	'not_found_in_trash' => __('No projects found in Trash'),
	'parent_item_colon' => '',
	'menu_name' => 'Project'
  );
  $args = array(
	'labels' => $labels,
	'public' => true,
	'publicly_queryable' => true,
	'show_ui' => true,
	'show_in_menu' => true,
	'query_var' => true,
	'rewrite' => true,
	'capability_type' => 'post',
	'has_archive' => true,
	'hierarchical' => false,
	'menu_position' => null,
	'supports' => array('title','editor','author','thumbnail','excerpt','comments'),
	'menu_icon' => ICON_PATH . '/images/icons/portfolio_1_16.png',
  );
  // The following is the main step where we register the post.
  register_post_type('project',$args);
}
//'taxonomies' => array('post_tag'),

/*-- Custom Post Init Ends --*/

// Add filter to ensure the text Project, or project, is displayed when a user updates a project
add_filter('post_updated_messages', 'project_updated_messages');
function project_updated_messages( $messages ) {
  global $post, $post_ID;
  $messages['project'] = array(
	0 => '', // Unused. Messages start at index 1.
	1 => sprintf( __('Project updated. <a href="%s">View project</a>'), esc_url( get_permalink($post_ID) ) ),
	2 => __('Custom field updated.'),
	3 => __('Custom field deleted.'),
	4 => __('Project updated.'),
	/* translators: %s: date and time of the revision */
	5 => isset($_GET['revision']) ? sprintf( __('Project restored to revision from %s'), wp_post_revision_title( (int) $_GET['revision'], false ) ) : false,
	6 => sprintf( __('Project published. <a href="%s">View project</a>'), esc_url( get_permalink($post_ID) ) ),
	7 => __('Project saved.'),
	8 => sprintf( __('Project submitted. <a target="_blank" href="%s">Preview project</a>'), esc_url( add_query_arg( 'preview', 'true', get_permalink($post_ID) ) ) ),
	9 => sprintf( __('Project scheduled for: <strong>%1$s</strong>. <a target="_blank" href="%2$s">Preview project</a>'),
	  // translators: Publish box date format, see http://php.net/date
	  date_i18n( __( 'M j, Y @ G:i' ), strtotime( $post->post_date ) ), esc_url( get_permalink($post_ID) ) ),
	10 => sprintf( __('Project draft updated. <a target="_blank" href="%s">Preview project</a>'), esc_url( add_query_arg( 'preview', 'true', get_permalink($post_ID) ) ) ),
  );
  return $messages;
}

// Styling for the custom post type icon
function project_header() {
    global $post_type;
    ?>
    <style>
    <?php if (($_GET['post_type'] == 'project') || ($post_type == 'project')) : ?>
    #icon-edit { background:transparent url('<?php echo ICON_PATH .'/images/icons/portfolio_1_32_hover.png';?>') no-repeat;  }
    <?php endif; ?>
    </style>
    <?php
}
add_action('admin_head', 'project_header');
?>