I see where you're coming from, that all makes sense. I think any page with a tag cloud runs into those same issues, but again, that's just one person's opinion.
In terms of pure search functionality, I think having tags be searchable would help. Your vision for the site and the aesthetics of it are important also, so if you prefer separate search systems, alternatively the cloud could be cleaned up. I don't think the cloud looks bad as it is, but I would estimate 1/2 to 2/3 of the bumps haven't been tagged yet, so it would probably continue to grow. I feel a bit bad about causing some of the growth since I've been doing some of the tagging... maybe I haven't had a good enough idea of what you're looking for in a tag. If you're monitoring and don't like what I'm doing with some of the tags, please let me know. Just trying to contribute some to a site I've always enjoyed visiting.
Anyhow, with 1300+ bumps and counting, it's probably inevitable that a tag cloud will get quite large, so (again, in one person's humble opinion) I think your solution sounds good and would result in more successful searches.
As always, thanks for your hard work in maintaining this site.