This problem was originally discussed about v. 2.0 at community.getk2.org/forum/topics/tags-sef-problem-for-word

In v. 2.2, on an item page, links to tags that have spaces in them are still not working properly for me so I had to go back and do the original fix. In components\com_k2\sef_ext\com_k2.php, on line 129, replace

case 'tag':
$title[] = 'tag';
$title[] = str_replace('%20','-',$tag);
break

with

case 'tag':
$tag=str_replace('%20','-',$tag);
$tag=str_replace('+','-',$tag);
$title[] = 'tag';
$title[] = $tag;
break;