I think just a bit of refining may be required. The filesystem would probably come with a few tags already, so there's less chance of confusing the basic ones. With an easy-to-use tag manager that keeps track of all the extant tags, and the ability to do batch operations across all tags, I think it would work fine. The tricky part will be integrating with systems used to hierarchical directories.
Instead of having operators like AND be path components, I would have the path separator itself be an and operator, or use & and | to just make logical expressions. As long as you're throwing out the hierarchy, you may as well throw out the hierarchical syntax.
Having operators be part of the path itself actually struck me as genius. This way tagfs is 'backwards compatible' with current file managers and you can 'browse' the filesystem quite naturally. Having the operators as path separators would require changes to the filemanagers and the host of tools we already use to work with our filesystems.
Instead of having operators like AND be path components, I would have the path separator itself be an and operator, or use & and | to just make logical expressions. As long as you're throwing out the hierarchy, you may as well throw out the hierarchical syntax.