Using %tag% in permalinks have required a few updated to rewrite.php and
link-template.php on every upgrade because %tag% have not been part of the $rewritecode = array(...
I can see that this has now been fixed in rewrite.php in version 2.8.6 (or 2.8.5 not sure actually) but it still remains unfixed in link-template.php in function get_permalink.
If you dont add %tag% to the array in link-template.php your url will contain %tag% because the replace is not happening.