On a 'clean' install of trac (eg: webfaction one-click installer 0.12, as well as from trac trunk), I tried to add the tractags plugin (both 0.6 and trunk, same issue). After upgrading the environment, it kept insisting I upgrade, and when I tried that, it gave an error (tag table already exists). After poking around, I found this is what triggers it:
WARNING: Component <tractags.model.TagModelProvider object at 0x9afe44c> requires environment upgrade
I added this to [components], which seems to work-around it for now:
tractags.model.tagmodelprovider = disabled
Without this, it's not possible to run this plugin.