That's it!
Wow, Beavix, you're right! After a little experimenting, I learned that Finder adds the "All Tags..." item to the Sidebar if the number of tags significantly exceeds the first screen length of the Finder window and the scroll bars appear. (Deleting the number of tags it takes to return the Finder window to a single screen without scroll bars -- plus a few more tag deletions -- seems to get rid of the "All Tags..." item again.)
Mystery solved, thanks to Beavix's insight.