%1 doesn't get converted to taxonomy name when overriding title
It works for me with Drupal 7.

What I did was enabling the validation criteria, set the validator to Taxonomy term, and the type of the filter value to Term ID.



When I visit http://example.com/programming-languages I get the list of all the taxonomy terms terms for the "Programming languages" vocabulary.



When I visit http://example.com/programming-languages/20, I get a page using the overridden title.