This is against Tag-it 2.0. This is possibly related to #48 although I couldn't quite understand that issue. If I initialize the tag-it control from a <ul> containing an html entity, the entity appears escaped in the control.
<li>tag & stuff</li>
If I initialize the tagit control from this ul, then the tagit control will display & instead of simply &. This is due to _create() using html() to get the contents of the <li>. I changed line 139 to use text() instead of html() and it solved the issue for me. The correction to line 139 is as follows:
Fixed in #106