Hi Teka!
1. The plugin follows the wrapping element, just like any other element does. It appears that the wrapper is however positioned incorrectly within the slider: http://i.imgur.com/i6gZ9ZP.png
You might need to set a fixed width for the search or use a different element to place it within the slider?
2. It’s because that option is not for that. To get post tags as results, go to the General Options -> Sources 2 panel: http://i.imgur.com/3FoRQ1r.png
There you can select to search and return categories, tags and other taxonomy terms as well.
