I think the tooltip will make the things even messier. Stick to simple and descriptive tag names. Each tag should be self-descriptive.
Regarding the rotation I have an idea for you: Do not rotate them too much, as from the side they will be flat and it won't look good at all. Instead make each tag float in the space. The floating can be shared between all the tags, as if the wind is blowing them or each tag can have its independent float animation.
However placing a bunch of TextBox over one another can prove pretty troublesome. You must order the tags in a way that they won't overlap each other. Or in the worst case they must not overlap each other fully.
At the end I must say, that it is a good idea to wrap the tag in a custom control, as it gives you a common functionality for all the tags (animation, scaling, translation, specific events). It is a must.
If I have some spare time, I will try to prototype something similar, just to implement the idea of the overlapping.