Both of your points are right on. When you use tags, you are creating a separate page for each of those tags, which will inlude a link back to any posts containing that tag. This helps out in getting the post indexed because there are essentially all of these different pages linking back to your post.

But you are also correct in the fact that it can drain your internal link juice. Since each tag creates its own page, each tag on every page is another link pointing to a seperate page.

For example, if on your main page, you have 15 internal links that you want your link juice distributed through. If you have a tag cloud with 45 tags, your link juice will be distributed through all 60 internal links instead of just the 15 important ones.