taxonomy fields appear twice in input form for CCK node

I have created a custom content type using CCK and content taxonomy (CT).

For the taxonomy fields, I am using "save as tag" which does appear to be working for me.

However, when a user brings up the form to create content of this type, the taxonomy fields appear twice in the form:
1) near the top in a box marked "Category"
2) wherever the field input is entered

The behavior is very strange. It looks like I have to select the values I want in the top (categories box), and NOT in the fields. But if the field is marked as "required" it also wants a value entered in the second place (i.e. the field). However, this value is discarded.

Is this the expected behavior? Am I just supposed to hide the CT fields from the input form? And make sure none is marked as required?