I have the issue with spelling of tags too..
using joomla 1.5.8
the site you can see this on is
www.auctionandshoppingentertainment.com
what I have noticed (if this helps)
the words 'auction' and 'auctions' (without the '' ) appear a lot. The cloud generates the word 'auctiond' (which does NOT appear anywhere on the site I have checked)
same thing happens with the words 'price' and 'prices'
The cloud generates the word 'pricees'
If you exclude the words 'pricees' or 'auctiond' they still appear because they are not actually there... So I think that having words like 'dog' and 'dogs' is what is causing it - I have another tag cloud on the same page, and the ONLY words joomulus stuffs up are the ones that have multiple words with or without a 's' on the end... (they show next to each other in the other cloud program, Joomulus seems to mix them together...
I think this is seperate from the words showing that are blacklisted problem UNLESS the word is a 'fake' word created by the error....
hope this helps!