@tboyce1, I agree, both concepts are in place to add attributes to entities. With areas specifically dedicated to location and groups more general purpose. Still both are there to add attributes to entities, in order to deal with related entities in some sort of unified way.
While nesting is good because an entity can inherit attributes and thus save a lot of time for users with many entities (maybe think of it as auto-tags), individual tags could be a good addition for attributes used by few entities. These would pollute a tree view. Think of a bot (inspired by github) tagging entities which are frequently unavailable or have a high power consumption so these can be manually or automatically be dealt with.
But as @frenck would probably put it: Tags and groups need to be brought to use. So this needs support in automations (triggers and actions) and the visualization in the UI. This will be quite some effort.
A term could be ‘selector’, where a group of entities is selected by hierarcal group (auto-tag) or individual tag, together with a logic function how (and=all, or=any, xor=exactly one, … ) they shall be combined.
At least this could become the common underlying concept which could be used by frontend features like areas or groups. And so reduce advanced queries/selections in templates and such things to a unified approach.
Sorry for the lengthy article, but reading the whole stream here was enlightening for me. First I would have preferred tags only, but now it gets clearer. Hope it’s helpful at all though.