The tag itself means nothing.
Using the rules-as-written tag means and does nothing. It is just a tag. It exists solely to categorise and describe the question based on content already found in the question itself. It introduces no magical rules or restrictions and no new information, and implies nothing whatsoever not already found in the question text.
All of this is true for all tags. Game system tags are the one and only exception where we might introduce altogether new information in tags alone.
This means if the question does not appear to be laying down any requirements for rules-as-written or legalistic interpretations, rules-as-written should not be tagged on the question. If the question is clearly requesting RAW (or otherwise requesting strict legalistic rules interpretation) it should be tagged rules-as-written. Add or remove the tag as necessary so as to meet these guidelines.
These things were not always the case for the rules as written tag: it used to introduce magical rules all on its own by the mere fact of being present, but that did not work very well for us, and we walked that back to this current state (the default state) 2½ years ago in A low-intervention approach [rules-as-written]: back to tagging basics.
Focus on the question content, not on the tag. Tag to describe and categorise based on the question content.
If someone's asking for RAW information, that doesn't mean only RAW is allowed.
Let's be clear: if someone's asking about how the RAW works, they are seeking that information and answers should be telling them how the RAW works. Answers not telling them that are probably unhelpful.
However:
- It is perfectly OK to talk about RAW, but then also talk about other stuff. It is fairly normal for a RAW answer to explain the RAW itself... then also explain problems with it, introduce Good Subjective expertise to advise how to better handle the situation, or so on. This is common, normal, and good practice when relevant and helpful. We're fine with doing this.
- Declining to answer with the RAW and instead answering another way is also an option. It's a form of frame challenge. Much like any frame challenge this is risky. The answer might be helpful, but it might not and instead get strongly downvoted. Proceed at your own risk.
Focus on the querent's problem and their situation and provide a helpful response that helps them figure out their problem. Their problem involves wanting to understand RAW, so respect that in your answer and help them find that understanding (or don't at your own risk). This is no different from what we'd do with any other kind of question in any other tag.
On the situations you cited
Person A: Might I suggest adding the 'rules-as-written' tag, just to make it clear that you are looking for an exact-words reading of the rules based answer
Person B: Might I suggest not adding that [RAW] tag unless you have some specific, explained reason for wanting a RAW answer?
Person A is correct to suggest the RAW tag be added, but for the wrong reasons. The question is already clearly requesting RAW. This alone means we should tag it with RAW. That it draws attention to this question being about RAW is a side benefit but isn't the reason to tag in and of itself.
Person B is incorrect to request the tag not be added: we don't need someone to explain their reasoning before a tag gets applied. It's valid to ask for reasoning, but as far as tagging is concerned, we don't care whether or what reasoning is present. The tag fits, so add it. Go ahead and leave a comment requesting clarification about their reasoning if you feel it's material to the question, though.
As you point out, the RAW is in conflict with itself. Thus we cannot give a RAW compliant answer. You should remove the tag.
This line of reasoning is invalid and I've removed this comment. The querent is asking for rules as written information. Also, as stated, the tag doesn't mean anything, so fussing about the tag is pointless.
If the RAW is invalid, answer with that and show that. It's not unusual for RAW to look a bit like nonsense once we scrutinise it legalistically.
Most important takeaway:
rules-as-written is just a tag, nothing else. Focus on the question content. Tag according to question content. Don't focus on the tag this much. It does nothing other than be a tag. It has no rules attached. We wouldn't fuss about spells like this, we shouldn't fuss about rules-as-writen any moreso.
