The Tag Management interface lets you rename tags, but my experience has been that if you try to rename a tag to one that already exists it won't work. The work-around is: go to the entry(s) in question, go to Edit Tags, and select the correct tag(s). Then go back to Tag Management and delete the incorrect tag.
LJ's lack of a tag dropdown menu in the web interface seriously exacerbates this problem. Anyone know if there's anything afoot on this? (The Semagic client does have a dropdown menu, blessedly, though I've noticed that it never gets rid of deleted tags even when you tell it to Update. Anyone know if there are plans on that end either?)