Great find! I'm having some trouble following a few things though:
1. What are your steps for "adding a tag to a search"?
2. Agreed that the option doesn't seem to affect the drop-down in the note header, or Ctrl-Alt-T dialog. The note does mention a "Tag Picker" though - is that something else within the app? I only found the "Tag View", which has a search, but also doesn't seem to be affected by this option.
3. Further on the previous point, the Evernote help does not have any references to "Tag Picker", even though it appears to be a formal "thing", given the capitalization, and so I couldn't find any more information in the Help info (this is a note for Evernote folks).