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With the latest change change to dev, taxonomy_menu.module, @499
$link = menu_link_load($item['mlid']); from the old
$link['mlid'] = $item['mlid']; the load pulls all menu item attributes including the hidden attribute of 1. This causes a menu item to be built as hidden/disabled when the "Hide empty terms" setting is enabled, even though the term is not empty and does have an associated node.
Establishing the hidden attribute as 0 in the item array solves the issue while still allowing empty terms to be disabled by the setting.