I ended up going another direction; I'm pretty new to Fuel itself, and I may find better ways to do things.
But for now this was easier:
http://forum.getfuelcms.com/discussion/1523/category-tag-gui-assigning-to-content#Item_5
I've managed to put together a display that works well:
Outputs
[Parent Cat. Name] -> [Category Name] -> [Tag Name]
And uses the $tag->slug for the layout variable value
$tagOptions = array(); $categories = fuel_model('categories'); …
The 'tags' in the $has_many causes the error "There is an error with this layout because it either doesn't exist or contains one or more of the following reserved words: location, layout, published, cache, date_added, last_modified, last_modified_by…
I've settled on this at least for now:
My_fuel_layouts.php
$tagOptions = $this->fuel->tags->options_list();
and added to 'fields' this: 'tags' => array('type' => 'multi', 'sorting' => TRUE, 'mode' => 'checkbox', 'label' => …