How to use hook_menu_link_alter() on taxonomy term view?
hook_menu_link_alter() is invoked from menu_link_save(), which is the function called when a menu link is saved. The code you wrote for that hook would be invoked when, for example, you add a menu link from admin/structure/menu/manage/main-menu/add, and use taxonomy/term/%taxonomy_term/edit as value for Path. 

As Clive said, hook_menu_alter() is the hook you should use to change the menu item defined in hook_menu() from a module.