1. Tag (as Favourite) and item (eg a Hat). It lists in Favourites Ok.
  2. Tag a parent folder (eg Accessories). The hat is no longer shown in Favourites.
  3. Remove Tag from Accessories, the hat reappears.
This is NOT desirable behaviour. The point of tagging an item is to avoid having to walk the inventory tree to get to it. We should certainly be able to Tag an important folder, as well as a few selected key items within it.
This behaviour is consistent between SL viewer and Firestorm.
Screen shots
SS 1 Hat is shown in favourites
SS 2 Tagging the Accesories folder
SS 3 Hat is not shown