That's correct, It's working as it's designed out of the box. http://www-10.lotus.com/ldd/lcwiki.nsf/xpDocViewer.xsp?lookupName=Using+IBM+Connections+4.5+Documentation#action=openDocument&res_title=Understanding_profile_tags_ic45&content=pdcontent
There are a couple things you can do:
1 - URL Encode the tags. TWO-TERM TAG -> TWO-TERM%20TAG
2 - I also see SPACE commonly translated to + signs
3 - Open a PMR to find out if you can get support for multiple term tags. It's not in the default docs.