In searching for some answers, I noticed quite a few questions about this plugin. I would recommend reading the help thread at:
www herewithme .fr /wordpress-plugins/simple-tags,
the author's site. He is not there a lot, but does address most questions.
Simple Tags is a great plugin in theory, but there are quirks and complications. Things can work correctly for one person and not for others. In my case all is well except that the option to turn off the display of tags in posts does not work. Also if you use the "related posts" function of the plugin, its logic for choosing one post and ignoring another can be flawed. I think it should choose related posts based on the number of tags they have in common. The more tags in common, the closer related the posts... It does not always work this way. You can have a post that has 10 tags in common with another not listed as related, but that post does have a "related" post attached to it where there is only one tag in common.
But so far this is the only plugin I have found to extend the WordPress tags functionality that does sort of work with 2.3.