<p>I'm building a web 2.0 site with tagging functionality and wanted to get a sense from anyone with experience how long (in sec) the system can take to a) show a new tag on a given record and b) index the tag for search.  For example, does a newly added tag have to be available for search in 1 second but show on the user's screen in .1 seconds?</p>

I think this is really dependent on the type of site, size of site, overall complexity and user expectations.
You will have to balance everything to meet your needs, I don't believe there there is any de-facto standard that says it must be X seconds.
Responsiveness is important, but certain audiences are more forgiving than others, and certain systems need certain levels of performance.
Also, the users interface for addition is a big factor on how long it should display to the user and how you go about it.