The Tao theme overrides theme_pager() with it's own implementation in tao_pager(). However, unlike the base implementation, it does not check that $tags is actually set before using it. If you subsequently invoke theme('pager'), without setting a $tags parameter (which unless you want to set custom labels would be the normal), it will complain about 'undefined offset's on $tags
Drupal guidelines suggest that the code should be wrapped in isset()s: http://drupal.org/node/34341, so for the pager-first line...
$links['pager-first'] = theme('pager_first', ($tags ? $tags : t('First')), $limit, $element, $parameters);
...it should probably read...
$links['pager-first'] = theme('pager_first', (isset($tags) ? $tags : t('First')), $limit, $element, $parameters);
And again for pager-previous / pager-next / pager-last lines.
(I note that this is fixed in the 7.x version, so set to low priority)