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1) I have somewhat recently started treating 'blue_eyes' and 'blue eyes' as the same when you type in tags for tag autocomplete results--if you type either, you will get results for both--but they are different tags in hydrus. If there are a bunch of 'hairy_armpits' results beside 'hairy armpits', you will want to sibling them if you want to merge.
The same is true for some other punctuation characters. '[intensifies]' is the same as 'intensifies', etc... But these rules only apply to searching for tag autocomplete results, not files.
As the sibling system matures, I expect I will write a 'just merge all underscores into whitespace m8' master checkbox somewhere. I am someone who would prefer things this way in my own client, essentially banning an underscore from being in a tag, but a number of users prefer strongly to have underscores available.
2)Yes, unfortunately I just finished a large round of reworks to siblings and parents at the end of last year. Some things work much nicer, but the edit workflows are still bad and the docs are out of date. I will keep working on it and parents this year. At some point I want to do away with the hellish pair system and have some nice graph UI that you can just drag and drop arrows around, but that is still a dream.
In that dialog, any tag on the left will be replaced by that on the right. Since tags can only be replaced by one tag, you can have a bunch on the left, but only one on the right. Often in the program and help I write a shorthand style or UI pattern of "A->B", which means 'tag A siblinged to tag B' or 'tag A should appear as tag B in the UI'. If you want 'hairy armpits' to appear as 'armpit hair', put 'hairy armpits' on the left, and 'armpit hair' on the right.
I should update that 'add siblings' text label to be something like 'make this tag appear as something else with siblings'. What do you think would be a good label?
I am also likely to rename the siblings and parents systems. This has been an ongoing discussion. Many boorus use 'alias' and 'implication', which I like much more, and is less confusing.