Oh, they WORK, they just screw everything up. If you try to type a tag with a capital letter, it will automatically change it to a lowercase letter. BUT, if an alias has a capital letter, the capital letter will stay.
Here's an example using one of the broken aliases we currently have on request: let's say and alias is set up to change "rei_hino" to "Sailor_Mars". Entering "rei_hino" as a tag (regardless of capitalization) would result in "Sailor_Mars" (WITH the capitalization) being entered instead. Now the "Sailor_Mars" tag would still count towards the "sailor_mars" tag count, and searches ignore capitalization, so it would still show in a search. BUT, the booru recognizes capital letters as coming BEFORE the lowercase alphabet. So, it screws up the tag order by putting capitalized tags at the top (it also just plain looks bad).
To make matters worse, you can't go back and request the same alias without capitalization. The alias system recognizes it as an already-requested alias.