Unfortunately, it seems that Lion has made changes to Smart Folders that cause Tag Folders to break. As some of you may have noticed, I have not been very active for some time on this software. The amount of time it would take to update Tag Folders to work with Lion while also maintaining backwards compatibility with Snow Leopard and below is simply more than I can spare at this time in my life. Therefore, I'm afraid I must end my work on Tag Folders.
If anyone wants to take up development of the software, please do! It is, after all, GPL software. If you do, please post a link to your new and improved version here on MacUpdate so that we can all find it.
For those of you still running Snow Leopard and below, the software will continue to work as is. For those of you upgrading to Lion, I recommend looking into other OpenMeta software. You can get a list of such software at http://code.google.com/p/openmeta/wiki/OpenMetaApplications. I personally enjoy Ali Rantakari's Tagger and TagLists.
Thanks again to everyone who used Tag Folders, and even more thanks to all of you who reported bugs, suggested new ideas, submitted fixes, and so on. Without you, this software would never have been a fraction as useful as it was. Cheers to you all, and happy tagging!