same issue here too.
it’s interesting. I have 6 different worpress 2.7.1 installs with the same plugins added, including Simple Tags 1.6.4.
All on the same server.
Simple Tags works as expected on all but two installs.
Only difference between working and not, that I see, is those not working are installed in the web root. Those who are working are in sub-directories.
The other difference at the moment is cosmetic, being the themes used, but I don’t see how that would impact the admin back-end.