Where and how are escape quotes stripped when saving a taxonomy terms which include comas or quotes?
Oh! I just found it:

The function taxonomy_node_save(&amp;$node, $terms) calls drupal_explode_tags()

https://api.drupal.org/api/drupal/includes!common.inc/function/drupal_explode_tags/6 

which has:

// If a user has escaped a term (to demonstrate that it is a group,
// or includes a comma or quote character), we remove the escape
// formatting so to save the term into the database as the user intends.
$tag = trim(str_replace('""', '"', preg_replace('/^"(.*)"$/', '\1', $tag)));