I agree with pretty much everything you said there. I guess you could summarize my post as, "just don't call them folders."
I do like that idea though. Users often treat folders like tags. In a manner of speaking folders are tags, in that they label the contents. They just happen to be organized in a hierarchy. The tags get more specific as you dig deeper in to the tree.
I'll have a go at reasoning by anecdote. For some reason, the default behavior of the Finder search field searches your entire computer as you type. This always struck me as odd, because it is 180 degrees from what I wanted. I would frequently:
* Navigate to a relatively shallow point in a folder hierarchy
* Start searching from there, expecting that my search would be constrained to this location
I do this because I know (generally) where something might be, but I can't recall exactly where.
I ended up reconfiguring Finder to behave like this.
If you split the folder path by separator, you often get a set of tags. So, by drilling down in to a folder heirarchy, you're "scoping" your search by tags, getting more detailed as you go.
I think hierarchy may be the missing piece of the tagging puzzle. A hierarchy would provide guidance (and a visual component). It says, "start broad, then get specific". Imagine a workflow where you would navigate to a specific point in the tag tree, then create a document. Doing so would associate the document with the current tag set without any additional work. If needed, the user could add additional tags, drilling down as they go.
My most important point about "folders" is just that we should avoid referring to these new systems as such. If we want to make progress, we need to unhinge users' thoughts from old concepts.