I'm seeing the same error... And a blank page almost immediately after hitting the Populate posts button.
I did some testing on a multi-site with three blogs. One with about 95 posts, another over 300 posts and one with only pages and hidden from search engines. The strange thing is that the tags blog does not recieve any posts when I do Populate with the All blogs checked. But when I do it blog-by-blog, the tags blog gets populated in spite of the error (and blank page) ...
Another strange thing I noticed during the many tests with different plugin settings like Include pages, Include thumbnails and Privacy settings, one time the Populate process reached the "Finished importing posts into tags blogs!" message. This happened when populating from the smaller one of the two public blogs (so not all) and with all the default plugin options except the Privacy set to public. Trying again with the same settings from the same blog (I had cleared all posts from the tags blog first) the error occurred again.
When populating from the hidden blog (with just 6 pages and no posts) with the Include pages and Non-Public Blogs enabled, I always see the "Finished importing posts into tags blogs!" message and no error is shown in the log file.
I should mention this is on a WP 3.1.4 install where the plugin Networks for WordPress is also active. David Dean's plugin is used to manage several secundary networks running on the same install. Could that cause a conflict? Or is it a memory thing?
Hope this can be figured out so let me know if you need more info or if you need me to test some more :)