Hi!
1000 posts with tags should not be an issue. If the search speed is no different when the option is enabled, then no further action is required in my opinion.
1. It would actually work, the plugin looks in the database, so the styling is ignored.
2. The best approach in this case would be to configure and enable the index table engine, it would save you the time of adding the tags below each post manually. Check the index table chapter (12) and subchapters in the documentation for more information.
Best,Ernest Marcinko
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