Yes, that only searches the tags. I don't believe there is a way to eliminate it either. As someone who has made skins, I know that whatever image you use to define the search box in the upper right, that same image is also used for the tag search box.
I just now deleted line in the XML corresponding to the search box altogether, but all that does is remove search box "boundary", but the placeholder word "search" remains (in both the tag window and in the upper right).
