The task bar has a few different modes, but they aren't really comprehensive, and some of them exhibit inconsistent behavior.
1) The standard mode ("Always combined, hide lables") behaves oddly/inconsistently when there are multiple instances of an application open (or multiple tabs in IE8). If another window comes up front, it takes TWO clicks to get back to where you were. Clicking on the icon just brings up thumbnails, then you have to click on the instance. A click on the icon should bring up the last top-most instance (or tab) of that appliaction.
2) The more useful mode ("Combine when full") includes labels. Clicking on the icons works as expected even when multiple instances are open (good). Multiple instances are "grouped" side-by-side, rather than all in one button (i.e. "stacked"). Great. But if there are multiple instances of a single app open (like multiple notepad files or VS2008 instances), you can move the entire side-by-side group with respect to the other icons and apps on the task bar, but you cannot reorder the instances within the side-by-side group. The individual instances are always in the order they were launched. There really needs to be a way to re-order instances within the group.
3) Finally, there is no option for "Combine with full, hide labels", or "Never combine, hide labels". This is actually what I'd prever. The "Hide labels" should be a separate check-box, orthogonal and indepdent of the "combine" mode.
4) And lastly, in the "Combine when full" mode, it would be nice to have options to right-click a group of side-by-side options and say "combine", or right-click a combined set of instances and select "un-combine" (or some better term). If the taskbar is full when you uncombine something, it should combine some other set that is uncombined to make room. Put the user in control.
See above: separate out the "Hide labels" option from the "combine" options, and provide the ability to manually group and ungroup multiple instances.